SC 14D9

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14D-9

(Rule 14d-101)

Solicitation/Recommendation Statement

Under Section 14(d)(4) of the Securities Exchange Act of 1934

 

 

Juno Therapeutics, Inc.

(Name of Subject Company)

 

 

Juno Therapeutics, Inc.

(Name of Persons Filing Statement)

 

 

Common Stock, par value $0.0001 per share

(Title of Class of Securities)

48205A109

(CUSIP Number of Class of Securities)

Hans E. Bishop

President and Chief Executive Officer

400 Dexter Avenue North, Suite 1200

Seattle, Washington 98109

(206) 582-1600

(Name, address, and telephone numbers of person authorized to receive notices and communications

on behalf of the persons filing statement)

Copies to:

Kenton J. King

Graham Robinson

Amr Razzak

Skadden, Arps, Slate, Meagher & Flom LLP

525 University Avenue

Palo Alto, California 94301-1908

(650) 470-4500

 

 

 

  Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

 

 

 


ITEM 1. SUBJECT COMPANY INFORMATION

Name and Address

The name of the subject company to which this Solicitation/Recommendation Statement on Schedule 14D-9 (together with any exhibits and annexes attached hereto, this “Schedule 14D-9”) relates is Juno Therapeutics, Inc., a Delaware corporation (“Juno”). The address of Juno’s principal executive offices is 400 Dexter Avenue North, Suite 1200, Seattle, Washington 98109 and its telephone number is (206) 582-1600.

Securities

The title of the class of equity securities to which this Schedule 14D-9 relates is Juno’s common stock, par value $0.0001 per share. As of the close of business on January 26, 2018, there were 115,710,674 shares of common stock issued and outstanding.

 

ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON

Name and Address

The name, business address and business telephone number of Juno, which is both the person filing this Schedule 14D-9 and the subject company, are set forth above in “Item 1. Subject Company Information—Name and Address.

Tender Offer

This Schedule 14D-9 relates to a tender offer by Blue Magpie Corporation, a Delaware corporation (“Purchaser”) and wholly owned subsidiary of Celgene Corporation, a Delaware corporation (“Celgene”), to purchase all of the issued and outstanding shares of common stock, par value $0.0001 per share (the “Shares” and each, a “Share”), of Juno, other than any Celgene-Owned Shares and Company-Owned Shares (each as defined below) for a purchase price of $87.00 per Share in cash (the “Offer Price”), without any interest thereon and subject to any required tax withholdings, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated February 2, 2018 (as amended or supplemented from time to time, the “Offer to Purchase”), and in the related Letter of Transmittal (as amended or supplemented from time to time, the “Letter of Transmittal,” which, together with the Offer to Purchase, constitute the “Offer”). No offer is being made for any “Celgene-Owned Shares,” which include only those Shares that are owned at the commencement of the Offer by Celgene, Purchaser or any other direct or indirect wholly owned subsidiary of Celgene. If the Merger (as defined below) occurs, the Celgene-Owned Shares outstanding immediately prior to the effective time of the Merger (the “Effective Time”) will not be acquired for the Offer Price and will remain outstanding and continue as shares of common stock of the Surviving Corporation (as defined below). As of the date of this Schedule 14D-9, there were 11,109,160 Celgene-Owned Shares. Additionally, no offer is being made for any “Company-Owned Shares,” which include only those Shares that are owned at the commencement of the Offer by Juno (or held in Juno’s treasury). If the Merger occurs, then Company-Owned Shares outstanding immediately prior to the Effective Time will not be acquired for the Offer Price and will be cancelled and retired and will cease to exist.

The Offer is described in a Tender Offer Statement on Schedule TO (as amended or supplemented from time to time, and together with the exhibits thereto, the “Schedule TO”), filed by Celgene and Purchaser with the Securities and Exchange Commission (the “SEC”) on February 2, 2018. Copies of the Offer to Purchase and form of Letter of Transmittal are filed as Exhibits (a)(1)(A) and (a)(1)(B) hereto, respectively, and are incorporated herein by reference. The Offer to Purchase and form of Letter of Transmittal are being mailed to Juno’s stockholders together with this Schedule 14D-9.

The Offer is being made pursuant to an Agreement and Plan of Merger (as it may be amended or supplemented, the “Merger Agreement”), dated January 21, 2018, by and among Juno, Purchaser and Celgene, pursuant to which, among other matters, after the completion of the Offer and the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Purchaser will merge with and into Juno (the “Merger” and, together with the


Offer and the other transactions contemplated by the Merger Agreement, the “Transaction”), pursuant to Section 251(h) of the Delaware General Corporation Law, as amended (the “DGCL”), with Juno continuing as the surviving corporation in the Merger (the “Surviving Corporation”) and as a wholly owned subsidiary of Celgene. Because the Merger will be effected under Section 251(h) of the DGCL, no stockholder vote will be required to consummate the Merger. At the Effective Time, Shares not tendered pursuant to the Offer (other than any Celgene-Owned Shares, Company-Owned Shares or Shares held by stockholders of Juno who have properly exercised and perfected their statutory rights of appraisal under the DGCL) will each be converted into the right to receive $87.00 or any such higher consideration as may be paid in the Offer (the “Merger Consideration”), payable to the holder thereof in cash and without any interest thereon and subject to any required tax withholdings. The treatment of equity awards under Juno’s benefit plans is discussed below in “Item 3. Past Contracts, Transactions, Negotiations and Agreements—Arrangements between Juno and its Executive Officers, Directors and Affiliates.”

Purchaser’s obligation to purchase Shares validly tendered and not withdrawn pursuant to the Offer is subject to the satisfaction or waiver of certain customary closing conditions set forth in the Offer to Purchase, including (i) that the number of Shares validly tendered and not withdrawn in accordance with the terms of the Offer, together with the Celgene-Owned Shares, but not including Shares tendered pursuant to guaranteed delivery procedures unless and until such Shares are actually “received” in accordance with the terms of the Offer, represents at least one more than 50% of all Shares (the “Minimum Condition”), (ii) Juno’s material compliance with its covenants and agreements contained in the Merger Agreement, (iii) there not having been a Material Adverse Effect (as defined in the Merger Agreement) following the execution of the Merger Agreement, (iv) the expiration or termination of any waiting period (and extensions thereof) applicable to the transactions contemplated by the Merger Agreement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (v) the absence of any law or order by any governmental authority that would make illegal or otherwise prohibit the acquisition of the Shares pursuant to the Offer or the Merger, (vi) the accuracy of the representations and warranties of Juno contained in the Merger Agreement (subject to certain materiality and material adverse effect standards) and (vii) other customary conditions.

The Offer will initially expire at one minute after 11:59 p.m. Eastern Time on the date that is 20 business days following the commencement of the Offer. Purchaser may, in its discretion and without the consent of Juno, extend the Offer on one or more occasions in accordance with the terms set forth in the Merger Agreement and the applicable rules and regulations of the SEC. Purchaser may not terminate the Offer, except as described below, or permit the Offer to expire, without the prior written consent of Juno, prior to the earlier of the valid termination of the Merger Agreement and midnight, Eastern Time, on July 23, 2018 (the “End Date”), provided that if at such date, the only closing condition (other than the Minimum Condition) that has not been satisfied is the condition related to the expiration of the waiting period under the HSR Act, then the End Date will automatically be extended by 120 days. In the event that the only condition that has not been satisfied at the scheduled Offer expiration time is the Minimum Condition, then Purchaser will be required to extend the Offer on one or more occasions for an additional period of up to 10 business days per extension to allow the Minimum Condition to be satisfied, provided, however, that Purchaser shall not be required to extend the offer on more than three occasions that provide, in the aggregate, for an additional period of at least 30 business days to allow the Minimum Condition to be satisfied.

Celgene has formed Purchaser for the purpose of engaging in the Transaction. To date, Purchaser has not carried on any activities other than those related to its formation and entry into the Transaction.

The foregoing summary of the Offer is qualified in its entirety by the description contained in the Offer to Purchase, the Letter of Transmittal and the Merger Agreement. A copy of the Merger Agreement is filed as Exhibit (e)(1) to this Schedule 14D-9 and is incorporated herein by reference.

As set forth in the Schedule TO, the address of the principal executive office of each of Celgene and Purchaser is 86 Morris Avenue, Summit, New Jersey 07901. The telephone number of each is (908) 673-9000.

 

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The information relating to the Offer, including the Offer to Purchase, the Letter of Transmittal and related documents and this Schedule 14D-9, can be obtained without charge from the SEC’s website at www.sec.gov.

 

ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS

Except as set forth or incorporated by reference in this Schedule 14D-9, including in Juno’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the SEC on March 1, 2017 (the “Annual Report”), which Annual Report is filed as Exhibit (e)(10) hereto and incorporated herein by reference, or in Juno’s Definitive Proxy Statement on Schedule 14A, dated and filed with the SEC on April 24, 2017 (the “Proxy Statement”), which Proxy Statement is filed as Exhibit (e)(35) hereto and incorporated herein by reference, to the knowledge of Juno, as of the date hereof, there are no material agreements, arrangements or understandings, or any actual or potential conflicts of interest between Juno or its affiliates, on the one hand, and (i) its executive officers, directors or affiliates, or (ii) Celgene, Purchaser or their respective executive officers, directors or affiliates, on the other hand. The board of directors of Juno (the “Juno Board”) and the strategic committee of the Juno Board (the “Strategic Committee”) were aware of the agreements and arrangements described in this Item 3 during its deliberations of the merits of the Merger Agreement and in determining to make the recommendation set forth in this Schedule 14D-9.

Any information contained in the pages incorporated herein by reference shall be deemed modified or superseded for purposes of this Schedule 14D-9 to the extent that any information contained herein modifies or supersedes such information.

Arrangements with Celgene and Purchaser and their Affiliates

Exhibit (e)(10) is incorporated herein by reference and includes the following sections from the Annual Report: “Licenses and Third-Party Collaborations—Celgene Corporation.”

Merger Agreement

On January 21, 2018, Juno, Celgene and Purchaser entered into the Merger Agreement. The summary of the Merger Agreement contained in Section 8 of the Offer to Purchase and the description of the terms and conditions of the Offer and related procedures and withdrawal rights contained in Section 4 of the Offer to Purchase are incorporated herein by reference. Such summary and description are qualified in their entirety by reference to the full text of the Merger Agreement.

The Merger Agreement governs the contractual rights among Juno, Celgene and Purchaser in relation to the Offer and the Merger. The Merger Agreement is not intended to provide any other factual information about Juno, Celgene or Purchaser.

The Merger Agreement has been included as an exhibit to this Schedule 14D-9 to provide Juno’s stockholders with information regarding the terms of the Merger Agreement. The Merger Agreement contains representations and warranties made by Juno to Celgene and Purchaser and representations and warranties made by Celgene and Purchaser to Juno. Neither the inclusion of the Merger Agreement nor the summary of the Merger Agreement is intended to modify or supplement any factual disclosures about Juno, Celgene or Purchaser in Juno’s public reports filed with the SEC. In particular, the assertions embodied in these representations and warranties are qualified by information in the confidential company disclosure schedule provided by Juno to Celgene and Purchaser in connection with the signing of the Merger Agreement. This disclosure schedule contains information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Merger Agreement. In addition, the representations and warranties in the Merger Agreement were negotiated with the principal purpose of allocating risk among Juno, Celgene and Purchaser, rather than establishing matters of fact. Additionally, such representations and warranties may also be subject to a contractual standard of materiality that is different from what may be viewed as material by holders of Shares or from the standard of

 

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materiality generally applicable to reports or documents filed with the SEC. Accordingly, the representations, warranties and covenants in the Merger Agreement may not constitute the actual state of facts about Juno, Celgene or Purchaser. Juno’s stockholders are not third party beneficiaries of the Merger Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or conditions of Juno, Celgene, Purchaser or any of their respective subsidiaries or affiliates.

The summary of the material terms of the Merger Agreement and the descriptions of the conditions to the Offer contained in the Offer to Purchase and incorporated herein by reference do not purport to be complete and are qualified in their entirety by reference to the full text of the Merger Agreement, which is filed as Exhibit (e)(1) hereto and is incorporated herein by reference.

Amendments to Article 8 of the Collaboration Agreement and the Voting and Standstill Agreement

On August 13, 2015, Juno and Celgene entered into an amended and restated master research and collaboration agreement (the “Collaboration Agreement”), Article 8 of which included certain mutual confidentiality obligations with respect to Juno and Celgene (“Article 8 of the Collaboration Agreement”). In connection with discussions surrounding a potential transaction, Article 8 of the Collaboration Agreement was supplemented to, among other things, obligate Juno and Celgene, subject to certain exceptions, to keep confidential certain information relating to discussions between the parties regarding a possible strategic transaction, including the substance and status of any discussions. Juno and Celgene also modified the voting and standstill agreement, dated June 29, 2015 (the “Voting and Standstill Agreement”), by and among Juno, Celgene and Celgene RIVOT Ltd., a wholly owned subsidiary of Celgene (“Celgene RIVOT”), to provide a customary “fall away” provision that would cause the standstill provisions to be suspended upon the occurrence of specified events, including the entry into a definitive acquisition agreement with a third party other than Celgene or any of its affiliates or a tender offer or exchange offer initiated by any person other than Celgene or any of its affiliates in which Juno recommends acceptance of such tender offer or exchange offer.

Share Purchase Agreements and Celgene CD19 License

Pursuant to the Collaboration Agreement, Juno and Celgene agreed to collaborate on researching, developing, and commercializing novel cellular therapy product candidates and other immuno-oncology and immunology therapeutics, including, in particular, CAR and TCR product candidates. In April 2016, Celgene exercised its opt-in right to develop and commercialize product candidates from Juno’s CD19 program outside North America and China. As a result, Juno and Celgene entered into a License Agreement, dated April 22, 2016 (the “Celgene CD19 License”), pursuant to which Celgene received an exclusive, royalty-bearing license to develop and commercialize therapeutic CAR product candidates from Juno’s CD19 program in all territories outside of North America and China. Juno is also party to a Share Purchase Agreement, dated June 29, 2015 (the “2015 SPA”), with Celgene and Celgene RIVOT, pursuant to which Juno sold 9,137,672 Shares to Celgene RIVOT at an aggregate cash price of approximately $849.8 million, or $93.00 per Share, on August 4, 2015. On December 17, 2015, Celgene, Celgene RIVOT and Celgene Switzerland LLC, a wholly owned subsidiary of Celgene, (“Celgene Switzerland”) entered into a Stock Purchase Agreement (the “RIVOT-Switzerland SPA”), pursuant to which Celgene transferred the 9,137,672 shares of Juno that it held as part of the 2015 SPA from Celgene RIVOT to Celgene Switzerland. In connection with the RIVOT-Switzerland SPA, Juno and Celgene, Celgene RIVOT and Celgene Switzerland entered into an Assignment and Joinder Agreement, dated December 17, 2015 (the “Assignment and Joinder Agreement”) whereby Celgene RIVOT assigned its rights under the 2015 SPA to Celgene Switzerland.

On March 28, 2016, Celgene Switzerland exercised its annual top-up right under the 2015 SPA to purchase 1,137,593 Shares at a price of $41.32 per share, for an aggregate cash purchase price of $47.0 million. As Celgene in March 2016 did not exercise the top-up right in full to reach 10% ownership that would have been permitted by the top-up right, the top-up right that was triggered by the filing of the Annual Report only permitted Celgene to top-up its ownership stake of the Shares to 9.76%.

 

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On March 24, 2017, Celgene Switzerland exercised its annual right under the 2015 SPA to purchase additional Shares to “top up” its ownership interest in Juno. The top-up right that was triggered by the filing of the Annual Report permitted Celgene to top up its ownership stake in Juno to 9.76%. Celgene purchased 75,568 Shares at a price of $22.39 per Share, for an aggregate purchase price of $1.7 million, to top-up its ownership stake of Juno’s common stock to the permitted amount of 9.76%. The top-up right that will be triggered by the filing of Juno’s Annual Report on Form 10-K for the fiscal year ending December 31, 2017 will again permit Celgene to top up its ownership stake of Juno’s Shares to 9.76%.

On September 21, 2017, Juno entered into a share purchase agreement and omnibus amendment (the “2017 SPA”) with Celgene and certain of its subsidiaries (collectively referred to in this paragraph only as “Celgene”), pursuant to which Juno agreed to sell and Celgene agreed to buy 758,327 shares of Juno’s common stock in a private placement exempt from the registration requirements of the Securities Act of 1933, at a sale price equal to the price to the public in a concurrent public offering. The number of shares sold to Celgene constituted approximately 9.76% of the aggregate number of the shares sold in the public offering and the private placement to Celgene. The 2017 SPA also amended the terms of the previously disclosed Voting and Standstill Agreement and Registration Rights Agreement in order to subject the shares purchased in the 2017 SPA to the same terms and conditions under such agreements as if the shares had been purchased pursuant to the 2015 SPA.

The foregoing summary and description of the Merger Agreement, the Collaboration Agreement, the Voting and Standstill Agreement, the Celgene CD19 License, the 2015 SPA, the RIVOT-Switzerland SPA, the Assignment and Joinder Agreement and the 2017 SPA do not purport to be complete and is qualified in its entirety by reference to the full text of Merger Agreement, the Collaboration Agreement, the Voting and Standstill Agreement, the Celgene CD19 License, the 2015 SPA, the RIVOT-Switzerland SPA, the Assignment and Joinder Agreement and the 2017 SPA, respectively, which are filed as Exhibits (e)(1), (e)(2), (e)(3), (e)(4), (e)(5), (e)(6), (e)(7) and (e)(8) hereto respectively and are incorporated herein by reference.

Arrangements between Juno and its Executive Officers, Directors and Affiliates

Juno’s executive officers and the members of the Juno Board may be deemed to have interests in the Transaction that may be different from or in addition to those of Juno’s stockholders generally. These interests may create potential conflicts of interest. The Juno Board was aware of these interests and considered them, along with other matters described below in “Item 4. The Solicitation or Recommendation—Reasons for Recommendation,” in reaching its decision to approve the Transaction and recommend that Juno’s stockholders tender their Shares to Purchaser pursuant to the Offer.

For further information with respect to the arrangements between Juno and its executive officers, directors and affiliates described in this Item 3, please also see “Item 8. Additional Information—Golden Parachute Compensation” below, which is incorporated herein by reference, and information contained in the Proxy Statement under the headings “Director Compensation,” “Compensation Discussion & Analysis,” “2016 Summary Compensation Table,” “Grants of Plan-Based Awards,” “Outstanding Equity Awards at 2016 Fiscal Year End,” “Option Exercises and Stock Vested,” “Employment Agreements with Named Executive Officers,” “Change in Control and Severance Plan,” “Estimated Payments Upon Termination or Change in Control,” “Equity Compensation Plan Information,” and “Information About Stock Ownership—Security Ownership of Certain Beneficial Owners and Management.”

 

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Juno’s executive officers are as follows:

 

Name

  

Position

Hans E. Bishop

   President and Chief Executive Officer

Sunil Agarwal, M.D.

   President of Research and Development

Robert Azelby

   Executive Vice President, Chief Commercial Officer

Bernard J. Cassidy

   General Counsel and Secretary

Steven D. Harr, M.D.

   Chief Financial Officer and Head of Corporate Development

Ann L. Lee, Ph.D.

   Executive Vice President, Technical Operations

Also included in the below discussion is Hyam Levitsky, M.D., Juno’s Executive Vice President, Research and Chief Scientific Officer, who was a “named executive officer” for purposes of the recent Proxy Statement but is no longer an “executive officer” as defined in Rule 3b-7 under the Exchange Act (as defined below).

Outstanding Shares Held by Executive Officers and Directors

If Juno’s executive officers and directors who own Shares tender their Shares for purchase pursuant to the Offer, they will receive the same cash consideration on the same terms and conditions as the other stockholders of Juno. If such executive officers and directors do not tender their Shares for purchase pursuant to the Offer, but the conditions of the Offer are otherwise satisfied or waived in accordance with the terms of the Merger Agreement and the Merger is consummated, such executive officers and directors will also receive the same cash consideration on the same terms and conditions as the other stockholders of Juno. As of January 26, 2018, the executive officers and directors of Juno beneficially owned, in the aggregate, 14,709,947 Shares (which, for this purpose, excludes Shares underlying Options (as defined below, whether or not currently exercisable), RSUs, RSAs, PSUs and PSAs (as each term is defined below)).

The following table sets forth as described above the number of Shares beneficially owned as of January 26, 2018, by each of Juno’s executive officers and directors and the aggregate implied cash consideration that would be payable for such Shares pursuant to the Offer based on the Offer Price.

 

Name

   Number of
Shares
     Implied Cash
Consideration for
Shares
 

Name of Executive Officer or Director

     

Hans E. Bishop

     2,357,254      $ 205,081,098  

Robert Azelby

     —        $ —    

Bernard J. Cassidy

     54,371      $ 4,730,277  

Steven D. Harr, M.D.

     649,991      $ 56,549,217  

Hyam Levitsky, M.D.

     28,446      $ 2,474,802  

Howard H. Pien

     125,000      $ 10,875,000  

Hal V. Barron, M.D.

     100,000      $ 8,700,000  

Thomas O. Daniel, M.D.

     —        $ —    

Anthony B. Evnin, Ph.D.

     59,842      $ 5,206,254  

Jay T. Flatley

     31,500      $ 2,740,500  

Richard D. Klausner, M.D.

     728,775      $ 63,403,425  

Robert T. Nelsen(1)

     10,603,214      $ 922,479,618  

Rupert Vessey, BM BCh, DPhil

     —        $ —    

Mary Agnes Wilderotter

     —        $ —    

All of our current executive officers and directors as a group
(15 persons)(2)

     14,709,947      $ 1,279,765,389  

 

(1)

ARCH Venture Fund VII, L.P. (“ARCH VII”) is the record owner of 10,552,390 Shares (the “Record Shares”) as of January 26, 2018. ARCH Venture Partners VII, L.P. (the “GPLP”), as the sole general partner

 

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  of ARCH VII, may be deemed to beneficially own certain of the shares held by ARCH VII. ARCH Venture Partners VII, LLC (the “GPLLC”), as the sole general partner of the GPLP, may be deemed to beneficially own certain of the shares held by ARCH VII. Mr. Nelsen is a managing director of the GPLLC and therefore may be deemed to have voting and dispositive power over the Record Shares held by ARCH VII, and may be deemed to beneficially own certain of the Record Shares held by ARCH VII. of ARCH VII, may be deemed to beneficially own certain of the shares held by ARCH VII. In addition, as of January 26, 2018, Mr. Nelsen is the record holder of 50,824 Shares.
(2) In addition to the persons identified in the table above (excluding Dr. Levitsky, who was a named executive officer but is no longer a current executive officer), this line includes holdings of Sunil Agarwal, M.D. and Ann L. Lee, Ph.D., Juno’s two executive officers who are not named executive officers.

Treatment of Options

Pursuant to the terms of the Merger Agreement, each outstanding unvested Juno stock option (each, an “Option” and, collectively, the “Options”) (i) if granted 12 months or more prior to the Effective Time, will become vested pursuant to their respective terms or, if greater, with respect to 25% of the total number of Shares that are subject to such award, (ii) if granted following the date of the Merger Agreement but prior to the Effective Time, will become vested pursuant to their respective terms, or, if greater, with respect to 25% of the total number of Shares subject to such award, or (iii) if granted less than 12 months prior to the Effective Time (other than the awards described in (ii)), will become vested pursuant to their respective terms or, if greater, with respect to that number of Shares subject thereto, such that, following such vesting, the award will be unvested with respect to that number of Shares which would have become vested and resulted in the award being 100% vested had the holder of the award remained continuously employed for an additional 24 months following the Effective Time; provided, that, with respect to any awards referred to in subsections (i) and (iii) above, if, as of the 24-month anniversary of the Effective Time, any portion of such award remains unvested, such unvested portion will become immediately vested on such 24-month anniversary date, provided that the employee has remained employed through such 24-month anniversary date. All such awards that become vested or that are otherwise vested as of immediately prior to the Offer Acceptance Time (as defined in the Merger Agreement) will be cancelled and converted into a right to receive an amount in cash equal to the product of (i) the number of Shares subject to such vested award and (ii) the Offer Price (reduced by the applicable exercise price). In addition, the terms of Options held by non-employee directors provide that such Options will become fully vested upon a change of control, which includes the consummation of the Offer.

Options that are outstanding immediately prior to the Offer Acceptance Time but unvested after giving effect to the vesting acceleration described above will be assumed by Celgene and will be subject to the same terms and conditions as applied to each such Option award immediately prior to the Effective Time, provided that the number of shares subject to such assumed Celgene option, and the exercise price of such Celgene option, will be adjusted based on an exchange ratio (which means the quotient of (i) the Offer Price divided by (ii) the volume weighted average price per share of Celgene’s common stock on the Nasdaq Global Select Market for the 15 consecutive trading days ending on the complete trading day immediately prior to the Offer Acceptance Time (the “Exchange Ratio”)).

If the exercise price per share of any Option, whether vested or not, is equal to or greater than the Offer Price, such option will be cancelled without payment of any consideration to the holder thereof.

 

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The table below sets forth, as of and assuming the closing occurred on January 26, 2018, the Options held by each of Juno’s executive officers and directors and the effect of the foregoing provisions of the Merger Agreement thereon, including, as vested, any Options for which vesting accelerates, as described above, based on the following: (i) the aggregate number of Shares subject to such Options that are vested, (ii) the aggregate number of Shares subject to such Options that are unvested and (iii) the value of all such Options on a pre-tax basis at the Effective Time, calculated by multiplying the excess of the Offer Price over the per share exercise prices of such Options held by the individual by the number of Shares subject to all such Options.

 

Name

   Number of
Shares
Underlying
Vested Options
     Number of
Shares
Underlying
Unvested
Options
     Estimated Cash Value of
Company Stock Options
 

Named Executive Officers

        

Hans E. Bishop

     834,665        162,914      $ 68,014,919  

Robert Azelby

     105,583        123,922      $ 12,041,433  

Bernard J. Cassidy

     316,931        84,705      $ 27,196,719  

Steven D. Harr, M.D.

     357,147        109,444      $ 29,195,738  

Hyam Levitsky, M.D.(1)

     217,942        79,408      $ 14,271,876  

Other Executive Officers

        

Sunil Agarwal, M.D.

     98,064        215,733      $ 19,766,073  

Ann L. Lee, Ph.D.

     70,080        82,820      $ 3,692,535  

Non-Employee Directors

        

Howard H. Pien

     36,000        —        $ 1,623,720  

Hal V. Barron, M.D.

     111,000        —        $ 7,671,720  

Thomas O. Daniel, M.D.

     12,000        —        $ 764,520  

Anthony B. Evnin, Ph.D.

     36,000        —        $ 1,623,720  

Jay T. Flatley

     30,000        —        $ 1,897,260  

Richard D. Klausner, M.D.

     36,000        —        $ 1,623,720  

Robert T. Nelsen

     36,000        —        $ 1,623,720  

Rupert Vessey, BM BCh, DPhil

     —          —        $ —    

Mary Agnes Wilderotter

     111,000        —        $ 7,494,720  

 

(1) Dr. Levitsky is no longer an executive officer as defined in Rule 3b-7 under the Exchange Act (as defined below).

Treatment of Restricted Stock Units and Restricted Share Awards

Pursuant to the terms of the Merger Agreement, each outstanding award of Juno time-based restricted stock units (“RSUs”) and each outstanding Juno time-based restricted stock award (“RSAs”) (i) if granted 12 months or more prior to the Effective Time, will become vested pursuant to their respective terms or, if greater, with respect to 25% of the total number of Shares that are subject to such award, (ii) if granted following the date of the Merger Agreement but prior to the Effective Time, will become vested pursuant to their respective terms, or, if greater, with respect to 25% of the total number of Shares subject to such award or (iii) if granted less than 12 months prior to the Effective time (other than as described in (ii)), will become vested pursuant to their respective terms or, if greater, with respect to that number of Shares subject thereto, such that, following such vesting, the award will be unvested with respect to that number of Shares which would have become vested and resulted in the award being 100% vested had the holder of the award remained continuously employed for an additional 24 months following the Effective Time; provided, that, with respect to any awards referred to in subsections (i) and (iii) above, if, as of the 24-month anniversary of the Effective Time, any portion of such award remains unvested, such unvested portion will become immediately vested on such 24-month anniversary date, provided that the employee has remained employed through such 24-month anniversary date. All such awards that become vested or that are otherwise vested and not yet settled as of immediately prior to the Offer Acceptance Time (as defined

 

8


in the Merger Agreement) will be cancelled and converted into a right to receive an amount in cash equal to the product of (i) the number of Shares subject to such vested award and (ii) the Offer Price. In addition, in accordance with their terms, RSUs held by non-employee directors will be paid upon a change of control, which includes the consummation of the Offer.

RSUs and RSAs that are outstanding immediately prior to the Offer Acceptance Time, but unvested after giving effect to the vesting acceleration described above, will be assumed by Celgene and will be subject to the same terms and conditions as applied to each such RSUs or RSAs (as applicable) immediately prior to the Effective Time, provided that the number of shares subject to such assumed Celgene time-based restricted stock units or Celgene time-based restricted stock awards (as applicable) will be adjusted based on the Exchange Ratio.

The table below sets forth, as of and assuming the closing occurred on January 26, 2018, the RSUs and RSAs held by each of Juno’s executive officers and directors and the effect of the foregoing provisions of the Merger Agreement thereon other than any accelerated vesting provisions described above, based on the following: (i) the aggregate number of Shares subject to such RSUs or RSAs (as applicable) and (ii) the value of such RSUs and RSAs (as applicable) on a pre-tax basis at the Effective Time, calculated by multiplying the Offer Price by the number of Shares subject to each award of RSUs or RSAs (as applicable).

 

Name

   Number of
Shares
Underlying
RSUs
     Estimated
Cash Value
of RSUs
     Number of
Shares
Underlying
RSAs
     Estimated
Cash Value of
RSAs
 

Named Executive Officers

           

Hans E. Bishop

     44,177      $ 3,843,399        65,105      $ 5,664,135  

Robert Azelby

     34,939      $ 3,039,693        —        $ —    

Bernard J. Cassidy

     24,390      $ 2,121,930        —        $ —    

Steven D. Harr, M.D.

     27,439      $ 2,387,193        50,009      $ 4,350,783  

Hyam Levitsky, M.D.(1)

     79,634      $ 6,928,158        —        $ —    

Other Executive Officers

           

Sunil Agarwal, M.D.

     84,549      $ 7,355,763        —        $ —    

Ann L. Lee, Ph.D.

     —        $ —          35,004      $ 3,045,348  

Non-Employee Directors

           

Howard H. Pien

     5,050      $ 439,350        —        $ —    

Hal V. Barron, M.D.

     3,780      $ 328,860        —        $ —    

Thomas O. Daniel, M.D.

     —        $ —          —        $ —    

Anthony B. Evnin, Ph.D.

     —        $ —          —        $ —    

Jay T. Flatley

     —        $ —          —        $ —    

Richard D. Klausner, M.D.

     —        $ —          —        $ —    

Robert T. Nelsen

     3,234      $ 281,358        —        $ —    

Rupert Vessey, BM BCh, DPhil

     —        $ —          —        $ —    

Mary Agnes Wilderotter

     —        $ —          —        $ —    

 

(1) Dr. Levitsky is no longer an executive officer as defined in Rule 3b-7 under the Exchange Act.

Treatment of Performance Restricted Stock Units and Performance Restricted Shares

Pursuant to the Merger Agreement, all Juno performance-based restricted stock units (“PSUs”) and Juno performance-based restricted share awards (“PSAs”) will vest as to 50% of the total number of PSUs or PSAs (as applicable) subject to such awards, and such vested portion will be cancelled and converted into a right to receive an amount in cash equal to the product of (i) such 50% vested portion of the award and (ii) the Offer Price. The remaining 50% of the PSUs or PSAs (as applicable) will be assumed by Celgene and will be subject to the same terms and conditions as were applicable to such awards immediately prior to the Offer Acceptance Time, provided that the number of shares subject to such PSUs or PSAs (as applicable) will be adjusted based on the

 

9


Exchange Ratio, except that (i) 60% of such remaining PSUs or PSAs (as applicable) will vest on the one-year anniversary of the Effective Time and (ii) 40% of such remaining PSUs or PSAs (as applicable) will vest on the earlier of (A) the second anniversary of the Effective Time and (B) the first approval by the U.S. Food and Drug Administration (the “FDA”) of JCAR017.

The table below sets forth, as of and assuming the closing occurred on January 26, 2018, the PSUs and PSAs held by each of Juno’s executive officers and directors and the effect of the foregoing provisions of the Merger Agreement thereon other than the accelerated vesting provisions described above, based on the following: (i) the aggregate number of Shares subject to such PSUs or PSAs (as applicable) and (ii) the value of such PSUs or PSAs (as applicable) on a pre-tax basis at the Effective Time, calculated by multiplying the Offer Price by the number of Shares subject to each award of PSUs or PSAs (as applicable).

 

Name

   Number
of PSUs
     Estimated
Cash Value
of PSUs
     Number of
PSAs
     Estimated
Cash Value
of PSAs
 

Named Executive Officers

           

Hans E. Bishop

     —        $ —          35,893      $ 3,122,691  

Robert Azelby

     —        $ —          35,893      $ 3,122,691  

Bernard J. Cassidy

     —        $ —          35,893      $ 3,122,691  

Steven D. Harr, M.D.

     —        $ —          35,893      $ 3,122,691  

Hyam Levitsky, M.D.(1)

     25,860      $ 2,249,820        —        $ —    

Other Executive Officers

           

Sunil Agarwal, M.D.

     —        $ —          35,893      $ 3,122,691  

Ann L. Lee, Ph.D.

     —        $ —          35,000      $ 3,045,000  

Non-Employee Directors

           

Howard H. Pien

     —        $ —          —        $ —    

Hal V. Barron, M.D.

     —        $ —          —        $ —    

Thomas O. Daniel, M.D.

     —        $ —          —        $ —    

Anthony B. Evnin, Ph.D.

     —        $ —          —        $ —    

Jay T. Flatley

     —        $ —          —        $ —    

Richard D. Klausner, M.D.

     —        $ —          —        $ —    

Robert T. Nelsen

     —        $ —          —        $ —    

Rupert Vessey, BM BCH, DPhil

     —        $ —          —        $ —    

Mary Agnes Wilderotter

     —        $ —          —        $ —    

 

(1) Dr. Levitsky is no longer an executive officer as defined in Rule 3b-7 under the Exchange Act.

Change in Control and Severance Plan

Each of Juno’s executive officers participates in Juno’s change in control and severance plan (the “Change in Control and Severance Plan”). Under the Change in Control and Severance Plan, for the period commencing from the consummation of a “change in control” and continuing until 12 months following the change in control (the “change in control period”) if any participant is terminated for any reason other than “cause” (as defined in the Change in Control and Severance Plan), death or disability, or a plan participant voluntarily resigns for “good reason” (as defined below), the plan participant would be entitled to receive severance benefits. Under the plan, “good reason” means (i) a material reduction in the executive’s annual base salary, (ii) a material diminution of an executive’s authority, duties, or responsibilities in effect immediately prior to such reduction, (iii) a change in employment location of more than 50 miles, or (iv) Juno’s material breach of the terms of any material written agreement or covenant with the plan participant related to his or her provision of services to Juno. Upon the occurrence of such an event (each, a “qualifying termination”), each plan participant is entitled to receive the severance benefits as listed below, provided that such benefits are more favorable than the participant would be entitled to receive under his or her employment contract with Juno. Under the Change in Control and Severance Plan, upon a qualifying termination of employment, Mr. Bishop is entitled to receive: (i) 24 months of salary severance, (ii) a bonus severance that is the greater of (a) 100% of pro-rated annual target bonus and (b) bonus

 

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based on actual achievement against target objectives as of date of termination, (iii) 24 months of continued benefits and (iv) 100% acceleration of unvested and outstanding time-based equity awards. All other executive officers are entitled to receive the following upon a qualifying termination of employment: (i) 12 months of salary severance, (ii) a bonus severance that is the greater of (a) 100% of pro-rated annual target bonus and (b) bonus based on actual achievement against target objectives as of date of termination, (iii) 12 months of benefits continuation and (iv) 100% acceleration of unvested and outstanding time-based equity awards.

Additionally, with respect to any unvested equity award, other than performance-based equity awards, granted on or after November 4, 2015 that is held by a participant in the Change in Control and Severance Plan and who remains a service provider of Juno through the consummation of a change in control, 25% of the unvested shares subject to such award will become vested and exercisable immediately prior to the change in control. The terms of the Merger Agreement provide for this or more favorable accelerated vesting of equity awards upon the Offer Acceptance Time. Further, under the terms of the Change in Control and Severance Plan, if any unvested time-based equity award is not assumed by the acquirer as part of the Transaction, all of the unvested shares subject to such award will become vested and exercisable immediately prior to the change in control.

The Change in Control and Severance Plan also provides for severance benefits upon qualifying terminations of employment outside the change in control period. Specifically, if a plan participant is terminated for any reason other than for cause, death or disability, the plan participant would be entitled to receive severance benefits, provided that such benefits are more favorable than the plan participant would be entitled to receive under his or her employment contract with Juno. For Juno executive officers, such severance benefits under the Change in Control and Severance Plan include: (i) 12 months of salary severance, (ii) a bonus severance that is the greater of (a) 100% of pro-rated annual target bonus and (b) bonus based on actual achievement against target objectives as of date of termination and (iii) 12 months of continued benefits.

PSU and PSA Awards

The terms of the PSU and PSA awards granted to executive officers provide that in the event the officer’s employment is terminated by Juno without “cause” or by the officer for “good reason” (as those terms are defined in the applicable award agreements), in either case during the 12-month period following a “change in control” (as defined in Juno’s 2014 Equity Incentive Plan), then any remaining unvested PSUs or PSAs, as applicable, will vest in full.

Executive Officer Offer Letters

Juno has entered into offer letters with each of its executive officers which, among other things, specify the severance payments and/or benefits to be provided upon a termination of employment in certain circumstances. No executive officer is entitled to payments or benefits under his offer letter if the benefits and payments he would receive under the Change in Control and Severance Plan are more favorable.

Hans E. Bishop

Pursuant to Juno’s offer letter agreement with Mr. Bishop, if his employment is terminated other than for “cause”, death or disability, or he resigns for “good reason” (as defined in the offer letter agreement), in each case, upon or within the period that is three months prior to or 12 months following a “change in control” (as defined in Juno’s 2013 Equity Incentive Plan), 100% of the restricted shares granted in September 2013 pursuant to Mr. Bishop’s offer letter agreement, to the extent not already vested, will vest as of the later of (1) the change in control and (2) Mr. Bishop’s termination of employment, as applicable.

In addition, if Mr. Bishop’s employment is terminated other than for “cause,” death or disability, or he resigns for “good reason” (as those terms are defined in the offer letter agreement), he will receive continuing severance payments for a period of 12 months at a rate equal to the sum of (1) Mr. Bishop’s monthly base salary

 

11


and (2) 1/12th of his target annual bonus as in effect immediately prior to his termination. Further, if his employment is terminated for any reason except for cause, or if he resigns for good reason, then Mr. Bishop or, in the event of his death, Mr. Bishop’s beneficiaries will be entitled to receive any earned but unpaid bonus for the year prior to the year of termination and a pro rata bonus for the year of termination.

Robert Azelby

Under Juno’s offer letter agreement with Mr. Azelby, if Mr. Azelby’s employment is terminated other than for “cause,” death or disability, or he resigns for “good reason” (as those terms are defined in the offer letter agreement), in each case, upon or within the period that is three months prior to or 12 months following a “change in control” (as defined in Juno’s 2014 Equity Incentive Plan), then, the option award and RSU award granted pursuant to his offer letter, to the extent not already vested, will vest in full as of the later of (1) the change in control or (2) Mr. Azelby’s termination of employment, as applicable.

In addition, if Mr. Azelby is terminated for any reason other than for cause, death or disability, or he resigns for good reason, then, subject to his execution of a consulting agreement, if desired by Juno, Mr. Azelby is entitled to receive (1) continued payments of Mr. Azelby’s then-current base salary for a period of 12 months commencing on the 60th day following his termination of employment, payable pursuant to Juno’s standard payroll practices, (2) a pro-rated bonus for the partial year served prior to termination and (3) reimbursement of premiums to maintain group health insurance continuation benefits pursuant to COBRA for Mr. Azelby and his eligible dependents for up to nine months.

Bernard J. Cassidy

The terms of an offer letter agreement between Juno and Mr. Cassidy provide that if Mr. Cassidy’s employment is terminated other than for “cause,” death or disability, or he resigns for “good reason” (as those terms are defined in the offer letter agreement), in each case, upon or within the period that is three months prior to or 12 months following a “change in control” (as defined in Juno’s 2013 Equity Incentive Plan), then, 100% of the restricted shares subject to his initial restricted common stock grant, to the extent not already vested, will vest as of the later of (1) the change in control or (2) Mr. Cassidy’s termination of employment, as applicable.

In addition, if Mr. Cassidy is terminated other than for cause, death or disability, or if he resigns for good reason , then, subject to his execution of a consulting agreement to provide reasonable transition services, Mr. Cassidy is entitled to receive (1) continuing payments of Mr. Cassidy’s then-current base salary for a period of nine months following his termination of employment and (2) reimbursement of premiums to maintain group health insurance continuation benefits pursuant to COBRA for Mr. Cassidy and his eligible dependents for up to six months.

Steven D. Harr, M.D.

Under the terms of Juno’s offer letter agreement with Dr. Harr, if Dr. Harr’s employment is terminated other than for “cause,” death, or disability, or he resigns for “good reason” (as those terms are defined in the offer letter agreement), in each case, upon or within the period that is three months prior to or 12 months following a “change in control” (as defined in Juno’s 2013 Equity Incentive Plan), then 100% of the restricted shares subject to his initial restricted stock grant, to the extent not already vested, will vest as of the later of (1) the change in control or (2) Dr. Harr’s termination of employment, as applicable.

In addition, if Dr. Harr’s employment is terminated other than for cause, death or disability, or he resigns for good reason, then Dr. Harr is entitled to receive (1) continuing payments of Dr. Harr’s then-current base salary for a period of nine months commencing on the 60th day following his termination of employment, payable pursuant to our standard payroll practices and (2) reimbursement of premiums to maintain group health insurance continuation benefits pursuant to COBRA for Dr. Harr and his eligible dependents for up to six months.

 

12


Hyam Levitsky, M.D.

An offer letter agreement between Dr. Levitsky and Juno provides that if Dr. Levitsky’s employment is terminated other than for “cause,” death or disability, or he resigns for “good reason” (as those terms are defined in the offer letter agreement), then Dr. Levitsky will receive (1) continuing payments of his then-current base salary for a period of 12 months commencing on the 60th day following his termination of employment, payable pursuant to our standard payroll practices, (2) a pro-rated bonus for the partial year served prior to termination and (3) reimbursement of premiums to maintain group health insurance continuation benefits pursuant to COBRA for Dr. Levitsky and his eligible dependents for up to nine months.

Retention Bonus Pool

Under the Merger Agreement, Juno is permitted to establish a cash bonus pool of up to $20 million in the aggregate, from which awards may be allocated to employees (including executive officers other than Mr. Bishop and Dr. Harr) identified by, and in the amounts determined by, Mr. Bishop. Prior to making award allocations, Mr. Bishop is required to confer with certain of Celgene’s executives and management team members. Awards made under this bonus pool will be paid on the earlier of (i) the closing of the Transaction and (ii) November 30, 2018. Awards under the retention bonus pool have not yet been determined or communicated.

Certain Tax Reimbursement Arrangements

Certain of Juno’s executive officers may be subject to an excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) on payments they will or may receive in connection with the Transaction. Generally, an excise tax of 20% is imposed on each individual recipient of certain “parachute payments” that, under the rules of Section 280G of the Code, exceed a certain threshold amount for such individual and the corporation making the payments is denied a tax deduction for such payments. The excise tax is due in addition to the regular income and employment taxes otherwise payable in connection with compensatory payments to the Affected Individuals (as defined below). Payments to certain executive officers of Juno that will or may be considered “parachute payments” under Section 280G of the Code that would be subject to the Code Section 4999 excise tax include, as applicable, severance payments and benefits under the Change in Control and Severance Plan, the value of the accelerated vesting of unvested equity awards and the Excise Tax Reimbursement Payment (as defined below).

The Juno Board has considered the impact of the potential Code Section 4999 excise tax on certain individual executive officers of Juno who may be subject to such excise tax, and has determined that the imposition of the excise tax on such individuals would result in an unintended personal tax burden that would deprive the individuals of a portion of the value of their compensatory payments in connection with the Transaction, particularly their Juno equity awards (the “Affected Individuals”). The Juno Board has considered the tax implications of Sections 4999 and 280G of the Code and assessed the costs and benefits of potential payments to alleviate the Code Section 4999 excise taxes, to Juno, its stockholders, and each of the Affected Individuals. The Juno Board determined that our executive officers—Hans E. Bishop, Robert Azelby, Bernard J. Cassidy, Steven D. Harr, M.D., Sunil Agarwal, M.D. and Ann L. Lee, Ph.D, as well as Hyam Levitsky, M.D., constitute Affected Individuals.

As part of its considerations, the Juno Board noted that the primary reason for the magnitude of the Code Section 4999 excise tax burden was accelerated vesting of the equity awards. These awards have a high value as a result of the substantial value of Shares, including as a result of significant Juno achievements, including those leading to the Transaction and the Offer Price. The Juno Board determined that it is in the best interests of Juno to align the interests of its stockholders with those of the Affected Individuals and mitigate the negative tax impact to such Affected Individuals that would otherwise result from the Transaction, which is expected to bring significant financial benefits to Juno and its stockholders.

The Juno Board concluded that, contingent upon the Offer Acceptance Time, Juno will provide each of the Affected Individuals with a gross-up entitlement with respect to the Code Section 4999 excise tax, so that, on a

 

13


net after-tax basis, the Affected Individual would be in the same position as if no such excise tax had applied to him or her (the “Excise Tax Reimbursement Payment”). The actual amounts to be paid to the Affected Individuals by Juno will not be finally determined until after the consummation of the Transaction, and these amounts will be paid following the Offer Acceptance Time but generally before the Code Section 4999 excise tax becomes due. The Affected Individuals will retain the obligation to pay income and other taxes on all of the payments they will or may receive in connection with the Transaction and will forfeit the right to receive the Excise Tax Reimbursement Payment if either the Merger Agreement terminates pursuant to its terms or the Affected Individual’s employment with Juno terminates for any reason before the Offer Acceptance Time. On January 31, 2018, the Juno Board approved a form of tax reimbursement agreement (the “Tax Reimbursement Agreement”), setting forth the terms of the Excise Tax Reimbursement Payment applicable to the Applicable Individuals. Juno will enter into the Tax Reimbursement Agreement with each of the Affected Individuals.

The estimated value of the Excise Tax Reimbursement Payment for each named executive officer of Juno is set forth below in the table entitled “Golden Parachute Compensation Table” under “Item 8. Additional Information—Golden Parachute Compensation.” Based on the same assumptions set forth in footnote 4 to the “Golden Parachute Compensation Table,” the estimated aggregate Excise Tax Reimbursement Payment for Dr. Agarwal and Dr. Lee would be $8,123,447.

This summary of the Tax Reimbursement Agreements is qualified in its entirety by reference to the Tax Reimbursement Agreements, a form of which is filed as Exhibit (e)(36) and incorporated herein by reference.

Employee Benefits Following the Closing

Pursuant to the Merger Agreement, Celgene has agreed that for a period of 12 months following the Effective Time, Celgene will provide, or cause to be provided, to those of Juno’s employees (including any of Juno’s executive officers) who are employed by Juno or any of Juno’s subsidiaries as of immediately prior to the Effective Time, and who continue to be actively employed by the Surviving Corporation (or any affiliate thereof) during such 12-month period (the “Continuing Employees”) (i) base salary and incentive opportunities (excluding equity-based incentive opportunities) that in each case are no less favorable than the base salary and incentive opportunities (excluding equity-based incentive opportunities) applicable to each such Continuing Employees immediately prior to the Effective Time and (ii) employee benefits that are no less favorable, in the aggregate, to those employee benefits provided to such Continuing Employee prior to the Effective Time.

Director Compensation

The information set forth in the Proxy Statement, which is attached as Exhibit (e)(35) hereto, under the heading “—Director Compensation,” is incorporated herein by reference.

Director and Officer Exculpation, Indemnification and Insurance

Section 102(b)(7) of the DGCL permits a corporation, by a provision in its certificate of incorporation, to eliminate the personal liability of its directors to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, subject to certain exceptions. Juno’s Amended and Restated Certificate of Incorporation (“Certificate of Incorporation”) provides that Juno’s directors will not be personally liable to Juno or its stockholders for monetary damages for breach of fiduciary duty as a director. Accordingly, Juno’s directors will not be personally liable for monetary damages for breach of their fiduciary duty as directors, except for liabilities:

 

    for any breach of the director’s duty of loyalty to Juno or its stockholders;

 

    for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

 

    for unlawful payments of dividends or unlawful stock repurchases or redemptions, as provided under Section 174 of the DGCL; or

 

    for any transaction from which the director derived an improper personal benefit.

 

14


Under Section 145 of the DGCL, Juno has broad powers to indemnify its directors and officers against liabilities they may incur in such capacities. Juno’s Certificate of Incorporation and Amended and Restated Bylaws also provide that Juno will indemnify its directors and officers to the fullest extent permitted by Delaware law. In addition, Juno has entered into separate indemnity agreements with its directors and executive officers that require it, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified. Notwithstanding the foregoing, Juno is not obligated to indemnify such director or executive officer in certain circumstances, including for any claim for which payment has been received by or on behalf of such director or executive officer under any insurance policy or other indemnity provision, for an accounting of profits made from the purchase and sale by such director or executive officer of securities of Juno within the meaning of Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) or similar provisions of state statutory law or common law, or prior to a change in control, in connection with any proceeding initiated by such director or executive officer, including any proceeding initiated against Juno or its directors, officers, employees or other indemnitees, and certain other situations.

This description of the indemnity agreements entered into between Juno and each of its directors and executive officers is qualified in its entirety by reference to the form of indemnity agreement filed as Exhibit (e)(11) hereto, which is incorporated herein by reference.

The Merger Agreement provides for indemnification, advancement of expenses, exculpation from liabilities and insurance rights in favor of Juno’s current and former directors and officers, which are referred to as “indemnitees”, with respect to acts or omissions occurring prior to the Effective Time. Specifically, Celgene has agreed that all rights to indemnification, exculpation and advancement of expenses in favor of indemnitees as provided in Juno’s amended and restated certificate of incorporation or amended and restated bylaws or under any agreement filed as an exhibit to specified SEC filings of Juno or listed on the confidential company disclosure schedule provided by Juno to Celgene and Purchaser with respect to all matters occurring prior to or at the Effective Time will continue in full force and effect in accordance with their respective terms for a period of six years from the Effective Time.

In addition, Celgene has agreed that it will cause the Surviving Corporation to (and the Surviving Corporation has agreed that it will) indemnify and hold harmless each individual who is as of the date of the Merger Agreement, or who becomes prior to the Effective Time, a director or officer of Juno or who is as of the date of the Merger Agreement, or who thereafter commences prior to the Effective Time, serving at the request of Juno as a director or officer of another person (the “Indemnified Persons”), against all claims, losses, liabilities, damages, judgments, inquiries, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements, incurred in connection with any claim, action, suit or proceeding, whether civil, criminal, administrative or investigative, (including with respect to matters existing or occurring at or prior to the Effective Time, including the Transaction), arising out of or pertaining to the fact that the Indemnified Person is or was a director or officer of Juno or is or was serving at the request of Juno as a director or officer of another person, to the fullest extent permitted under applicable law. The Merger Agreement provides that each Indemnified Person will be entitled to advancement of expenses incurred in the defense of any such claim, action, suit or proceeding from the Surviving Corporation, in accordance with the organizational documents and any indemnification or other similar agreements of the Surviving Corporation, as in effect on the date of the Merger Agreement; provided that any Indemnified Person to whom expenses are advanced provides an undertaking, if and only to the extent required by the DGCL or the Surviving Corporation’s certificate of incorporation or bylaws (or comparable organizational documents) or any such indemnification or other similar agreements to repay such advances if it is ultimately determined by final adjudication that such Indemnified Person is not entitled to indemnification. Further, the Surviving Corporation will reasonably cooperate in the defense of any such matter.

Celgene and the Surviving Corporation have agreed to maintain in effect for a period of six years after the Effective Time, in respect of facts or events occurring prior to or at the Effective Time, policies of directors’ and officers’ liability insurance covering the persons currently covered by Juno’s existing directors’ and officers’

 

15


liability insurance and fiduciary liability insurance policies in an amount and scope at least as favorable as Juno’s policies existing on the date of the Merger Agreement; however, neither Celgene nor the Surviving Corporation will be required to pay with respect to such insurance policies, in the aggregate for all six years, more than 300% of the aggregate annual premium most recently paid by Juno for such insurance. In lieu of the foregoing, Celgene or the Surviving Corporation may purchase a six-year prepaid “tail” directors’ and officers’ liability insurance policy and fiduciary liability insurance policy on terms and conditions no less favorable than the directors’ and officers’ liability insurance policies in effect on the date of the Merger Agreement (with the maximum aggregate cost of such policy not to be in excess of the maximum contemplated by the preceding sentence).

The rights to advancement, exculpation and indemnification above will survive the consummation of the Merger, will be binding on all successors and assigns of the Surviving Corporation and Celgene, are intended to benefit, and will be enforceable by, each indemnified or insured party (including the Indemnified Persons) and his or her heirs or representatives and are in addition to, and not in substitution for, any other rights to indemnification, advancement of expenses, exculpation or contribution that any such Indemnified Person may have by contract or otherwise.

Section 16 Matters

Pursuant to the Merger Agreement, Juno and the Juno Board will, to the extent necessary, take appropriate action to approve, for purposes of Section 16(b) of the Exchange Act, the disposition and cancellation or deemed disposition and cancellation of Shares, Options, RSUs, RSAs, PSUs and PSAs in the Merger by applicable individuals and to cause such dispositions and/or cancellations to be exempt under Rule 16b-3 promulgated under the Exchange Act.

Rule 14d-10(d) Matters

The Merger Agreement provides that prior to the Offer Acceptance Time (as defined in the Merger Agreement), and to the extent permitted by applicable Legal Requirements (as defined in the Merger Agreement), the compensation committee of the Juno Board, at a meeting duly called and held, will approve, as an “employment compensation, severance or other employee benefit arrangement” within the meaning of Rule 14d-10(d)(2) under the Exchange Act, each agreement, arrangement or understanding between Purchaser, Juno or their respective affiliates and any of the officers, directors or employees of Juno that are effective as of January 21, 2018 or are entered into after the date of January 21, 2018 and prior to the Offer Acceptance Time pursuant to which compensation is paid to such officer, director or employee and will take all other action reasonably necessary to satisfy the requirements of the non-exclusive safe harbor set forth in Rule 14d-10(d)(2) under the Exchange Act.

Potential for Future Arrangements

To Juno’s knowledge, except for certain agreements described in this Schedule 14D-9 (or in the documents incorporated herein by reference) between Juno and its executive officers and directors, no employment, equity contribution or other agreement, arrangement or understanding between any executive officer or director of Juno, on the one hand, and Celgene, or any of its affiliates or Juno, on the other hand, existed as of the date of this Schedule 14D-9, and neither the Offer nor the Merger is conditioned upon any executive officer or director of Juno entering into any such agreement, arrangement or understanding.

It is possible that Continuing Employees, including executive officers, will enter into new compensation arrangements with Celgene. Such arrangements may include agreements regarding future terms of employment, the right to receive equity or equity-based awards of Celgene, and/or to receive retention bonus awards. Any such arrangements are currently expected to be entered into after the completion of the Offer and will not become effective until after the Merger is completed. There can be no assurance that the applicable parties will reach an agreement on any terms, or at all, and neither the Offer nor the Merger is conditioned upon any executive officer or director of Juno entering into any such agreement, arrangement or understanding.

 

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ITEM 4. THE SOLICITATION OR RECOMMENDATION

Solicitation/Recommendation

At a meeting held on January 21, 2018, after considering the terms of the Merger Agreement and other related Transaction documents, as well as the various presentations of Morgan Stanley & Co. LLC (“Morgan Stanley”), financial advisor to Juno, Juno’s management and the Strategic Committee’s legal advisors, the Strategic Committee, by unanimous vote, determined that the Transaction was advisable and fair to, and in the best interests of Juno’s stockholders and recommended that the Juno Board (i) approve the Transaction and declare the Transaction advisable to Juno and its stockholders, (ii) direct Juno to enter into and deliver the Merger Agreement, (iii) recommend that Juno’s stockholders tender their Shares to Purchaser pursuant to the Offer and (iv) effect the Merger pursuant to Section 251(h) of the DGCL.

After considering the unanimous determinations and recommendations of the Strategic Committee and other factors, at a meeting on January 21, 2018, the Juno Board voted unanimously (with the exception of Celgene’s current designee to the Juno Board, Dr. Rupert Vessey, and Celgene’s former designee, Dr. Thomas O. Daniel, who had recused themselves from such vote due to their current and former affiliation, respectively, with Celgene) and resolved, among other things, (i) to approve the Transaction and declare the Transaction advisable to Juno and its stockholders, (ii) to direct Juno to enter into and deliver the Merger Agreement, (iii) to recommend that Juno’s stockholders tender their Shares to Purchaser pursuant to the Offer and (iv) to effect the Merger pursuant to Section 251(h) of the DGCL.

Accordingly, for the reasons described in more detail below, the Juno Board, based on the recommendation of the Strategic Committee, recommends that the holders of the Shares tender their Shares pursuant to the Offer.

Accordingly, and for other reasons described in more detail below, the Juno Board unanimously recommends that Juno’s stockholders tender their Shares to Purchaser pursuant to the Offer.

A joint press release, dated January 22, 2018, issued by Juno and Celgene announcing the Offer, is included as Exhibit (a)(2)(A) hereto and is incorporated herein by reference.

Background of the Transaction

Juno and Celgene are parties to a number of agreements, including the Collaboration Agreement and the Voting and Standstill Agreement and certain other agreements as described more fully in “—Arrangements with Celgene and Purchaser and their Affiliates.” Pursuant to the Voting and Standstill Agreement, Celgene has the right, subject to certain conditions, to designate one nominee for election to the Juno Board. In April 2017, Celgene nominated and Juno appointed Dr. Rupert Vessey as Celgene’s designated director. Previously, Dr. Thomas O. Daniel had been the Celgene designee, and after retiring from Celgene, he remained on the Juno Board as a director. As part of their ongoing collaboration, from time to time Hans E. Bishop, the Chief Executive Officer of Juno, and Mark Alles, the Chief Executive Officer of Celgene, and other members of the senior management teams of Juno and Celgene, discussed generally Juno’s and Celgene’s respective businesses.

On August 28, 2017, in light of an upcoming meeting that Mr. Bishop and Dr. Steven D. Harr, Juno’s Chief Financial Officer and Head of Corporate Development, had planned with senior leadership at Celgene to discuss the parties’ ongoing collaboration, Dr. Harr reached out to representatives of Morgan Stanley with whom Juno had a pre-existing relationship as a result of Juno’s initial public offering of common stock and other informal corporate strategy matters, to schedule a telephone call to discuss how the existence of the Voting and Standstill Agreement may have a strategic impact on any potential discussions that might occur in the upcoming meeting with Celgene. At that time, Morgan Stanley was serving as a book-running manager in a follow-on public offering of Juno’s common stock, which was consummated on September 26, 2017. On September 9, 2017, Mr. Bishop and Dr. Harr held such a call with representatives of Morgan Stanley.

On September 14, 2017, the Juno Board held a meeting. Representatives from Juno management and Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”) were also present. At the meeting, management and the Juno

 

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Board discussed the recently announced acquisition of Kite Pharma, Inc. by Gilead Sciences and speculation in the media that Juno could be a potential acquisition target following the announcement of the Kite Pharma acquisition. At the meeting, management and the Juno Board also discussed the upcoming meeting between Mr. Bishop, Dr. Harr and senior leadership at Celgene, and management described strategic considerations related to the Voting and Standstill Agreement as had been discussed previously with representatives of Morgan Stanley. In light of the general acquisition climate and market speculation regarding Juno as a potential acquisition target, senior management and the Juno Board then asked representatives of Skadden to review elements of Juno’s standstill provision in the Voting and Standstill agreement with Celgene. The Juno Board then authorized management to preliminarily engage Morgan Stanley as financial advisor to Juno, as the Juno Board believed Morgan Stanley would be a valuable advisor in respect of strategic options and considerations relevant to any acquisition proposals Juno might receive.

On September 21, 2017, concurrently with the follow-on public offering of Juno’s common stock, Juno entered into a share purchase agreement with Celgene and certain of its subsidiaries, pursuant to which Juno agreed to sell and Celgene and its subsidiaries agreed to buy 758,327 Juno Shares in a private placement exempt from the registration requirements of the Securities Act of 1933, at a sale price equal to the price to the public in the public offering. The number of shares sold to Celgene and its subsidiaries constituted approximately 9.76% of the aggregate number of the shares sold in the public offering and the private placement to Celgene.

On September 25, 2017, Mr. Bishop, Mr. Alles, Dr. Harr, and Dr. George Golumbeski, Celgene’s Executive Vice President, Executive Advisor for Innovation, Business Development, met to discuss the ongoing collaboration and considerations for potential future collaboration arrangements. During this meeting, Mr. Alles and Dr. Golumbeski raised the possibility that Celgene could be interested in a potential strategic transaction with Juno if Juno were receptive to considering such a transaction. No financial or other terms of any such transaction were proposed. Mr. Bishop and Dr. Harr responded that they would discuss Celgene’s potential interest with the Juno Board.

On September 28, 2017, Mr. Bishop relayed the contents of the dinner discussion to Howard H. Pien, Chairman of the Juno Board. Mr. Bishop and Mr. Pien agreed that the appropriate next step was to update the full board. This discussion was scheduled for October 5, 2017.

Beginning in September, Juno management held discussions with a publicly traded healthcare company, “Party A,” about a potential collaboration or similar arrangement with respect to the Juno’s BCMA program that is not part of the Celgene collaboration (the “BCMA partnership discussions”). Juno entered into a confidentiality agreement with Party A with respect to the BCMA partnership discussions on or about September 21, 2017. The confidentiality agreement did not impose any “standstill” restrictions on Party A.

On October 5, 2017, in a meeting between members of Party A’s management and Juno management, including Mr. Bishop and Dr. Harr, Party A expressed interest in Juno’s BCMA program and raised the possibility that Party A could potentially be interested in a broader transaction if the circumstances required it, which Juno understood to mean if Juno had another interested party.

Later on October 5, 2017, the Juno Board held a meeting. Representatives of management, Skadden and Morgan Stanley were also present. At the meeting, the directors discussed with representatives of Morgan Stanley strategic considerations relevant to receipt of any acquisition proposals as well as potential responses to Celgene’s preliminary indication of an interest in exploring a potential transaction. The Juno Board determined that management should complete its in-process review of Juno’s long-range business and financial plan. In addition, the Juno Board directed that representatives of Morgan Stanley provide their preliminary financial analysis of Juno, including valuation considerations, to the Juno Board before the Juno Board made a determination on how to respond to Celgene. The Juno Board authorized Mr. Bishop to contact Mr. Alles to indicate that Juno management was in the process of updating the Juno Board on the prospects of the company and that the Juno Board would not be in a position to discuss a potential transaction until such process had concluded, which would likely take multiple weeks. The Juno Board also discussed with representatives of

 

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Morgan Stanley whether there may be other parties that might potentially be interested in a strategic transaction with Juno in the field of cellular immuno-oncology. Juno management then reviewed with the Juno Board the other companies with whom Juno had BCMA partnership discussions. Management proposed, and the Juno Board agreed, that management should attempt to push those conversations forward to see if any of those other companies may be interested in Juno’s BCMA program. The Juno Board authorized management to inquire with any companies that expressed such an interest whether they also had an interest in a broader transaction, including an acquisition of Juno.

Shortly after the October 5 meeting of the Juno Board, a representative of Skadden discussed with Mr. Pien and Mr. Bishop whether to form a committee of the Juno Board consisting of disinterested directors. Between October 7 and October 16, representatives of Skadden interviewed directors to identify potential conflicts. Through the course of those meetings, Dr. Vessey indicated that he desired to recuse himself because of his relationship with Celgene and his membership on the Juno Board as Celgene’s designee, Dr. Daniel indicated that he desired to recuse himself because of his prior relationship with Celgene and the fact that he had previously been Celgene’s designee on the Juno Board, and Robert Nelsen indicated that he desired to recuse himself because of significant personal and business relationships with Celgene and Dr. Golumbeski at Celgene. Following these interviews, representatives of Skadden reported to Mr. Pien and Mr. Bishop the desire of Dr. Daniel, Dr. Vessey, and Mr. Nelsen to recuse themselves from the process related to a potential strategic transaction and the formation of a strategic committee to be composed of only disinterested and non-recused directors at the upcoming Juno Board meeting on October 26.

On October 7, 2017, as directed by the Juno Board, Mr. Bishop called Mr. Alles and advised him that Juno management was in the process of updating the Juno Board on Juno’s prospects and that the Juno Board would not be in a position to discuss a potential transaction until such process had concluded. Mr. Alles informed Mr. Bishop that Celgene had a regularly scheduled board meeting coming up and proposed that he and Mr. Bishop touch base before the Celgene board meeting.

During October, Juno management reached out to two potential BCMA partners. One party indicated that although it had no interest in CD19, that it was interested in BCMA, but did not follow-up on the more narrow licensing discussion. The second party initially showed some interest in a BCMA partnership. Following repeated attempts to schedule meetings, a meeting was held with this second party in early December. Despite assurance that it would do so, this party provided no follow-up after the meeting. As a result, after a discussion among Juno management and the Juno Board, Juno management and the Juno Board determined that neither party had serious interest in an acquisition of Juno.

On October 20, 2017, during due diligence discussions in connection with a potential BCMA partnership, Party A informed Mr. Bishop that Party A might be interested in exploring the possibility of a broader transaction. Mr. Bishop suggested that the parties speak again prior to the Juno Board’s November meeting in order to better understand Party A’s interest and that Mr. Bishop would discuss Party A’s interest with the Juno Board at such time. On October 23, Mr. Bishop informed Mr. Pien of this discussion.

On October 23, 2017, Mr. Bishop informed Mr. Alles that the Juno Board would be reviewing a preliminary valuation analysis at its upcoming regularly scheduled board meeting on November 7, 2017. Mr. Bishop told Mr. Alles that he would contact Mr. Alles after the meeting.

On October 26, 2017, members of the Juno Board other than Dr. Daniel, Dr. Vessey and Mr. Nelsen held a telephonic meeting to discuss the formation of a strategic committee comprised entirely of disinterested and non-recused directors to assess and evaluate a potential acquisition of Juno, to discuss the status of discussions with third parties, including Party A’s expression of interest in Juno, and to discuss a preliminary valuation analysis. At the meeting, the Juno Board formed such a strategic committee of the Juno Board (the “Strategic Committee”) for the purposes of evaluating strategic alternatives. The Strategic Committee was comprised of Hal V. Barron, M.D., Mr. Bishop, Anthony B. Evnin, Ph.D, Jay T. Flatley, Richard D. Klausner, M.D., Mr. Pien and Mary Agnes Wilderotter (the members of the Juno Board other than those who had recused themselves because

 

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of current or former relationships with Celgene, which were Dr. Daniel, Dr. Vessey and Mr. Nelsen), and was delegated exclusive authority to review, consider, negotiate, reject, terminate, enter into agreements in furtherance of, and recommend to the Juno Board for approval any strategic transaction. In addition, the Juno Board adopted resolutions agreeing that the Juno Board would not approve or recommend any strategic transaction without the prior favorable recommendation of the Strategic Committee. The members of the Strategic Committee did not receive any additional compensation in connection with serving on the Strategic Committee.

On November 2, 2017, the Strategic Committee held a meeting with certain members of management and representatives of Morgan Stanley. At the meeting, management reviewed a long-term analysis of Juno’s standalone potential and revenue projections, which the Strategic Committee discussed at length.

On November 3, 2017, Party A conducted on-site diligence primarily related to the BCMA program and Juno’s manufacturing capabilities. During the course of these meetings, Party A reiterated to Dr. Harr that it was interested in a broader transaction. Dr. Harr informed Party A that the Juno Board had a regularly scheduled meeting the following week and that he would discuss Party A’s interest with the Juno Board.

On November 7, 2017, the Strategic Committee held a meeting with representatives of Skadden and Morgan Stanley. At the meeting, the Strategic Committee discussed potential strategic transactions with Celgene and Party A. At the request of the Strategic Committee, representatives of Morgan Stanley provided an update on the public market overall and the biotechnology market, discussed management forecasts for Juno’s clinical portfolio, discussed Morgan Stanley’s preliminary standalone analysis for Juno, and thereafter discussed tactical considerations and potential next steps. The Strategic Committee expressed a view that a transaction remained highly uncertain at that time and that a transaction process could be very damaging to Juno at a sensitive time, when focus on the business was very important. The Strategic Committee determined that, in order to agree to allow Celgene or Party A to perform due diligence customary for an acquisition transaction, the Strategic Committee needed to be comfortable that such party was willing to offer compelling value and, accordingly, Juno would need to understand such party’s proposed valuation of Juno. The Strategic Committee instructed Juno management to communicate that message to Celgene and Party A.

On November 8, 2017, Mr. Bishop called Mr. Alles and, as directed by the Strategic Committee, informed Mr. Alles that, given the value creation opportunities ahead, Juno was not actively seeking a sale or other strategic transaction and that the Strategic Committee considered it a difficult time to consider a strategic transaction; but, that if Celgene wanted to proceed with a proposal, it would require a compelling premium and full recognition of value to permit Celgene to conduct due diligence. Mr. Bishop informed Mr. Alles that Juno would need Celgene to provide its view on valuation of Juno in order for the Strategic Committee to fully consider the merits of any potential transaction.

On November 8, 2017, Dr. Harr informed Party A that the Juno Board was potentially interested in a broader discussion but would need to understand specifically Party A’s proposed valuation of Juno.

On November 13, 2017, members of Party A’s senior management had a meeting in Seattle with Juno management, including Mr. Bishop and Dr. Harr, and informed Juno management that Party A expected to be in a position to determine whether Party A would like to make a proposal to Juno within approximately one week.

On November 15, 2017, Mr. Alles communicated to Mr. Bishop that Celgene would like to start due diligence in furtherance of a potential acquisition transaction before expressing a view on valuation. Mr. Bishop responded that diligence could not start without Celgene providing its view on valuation along the lines outlined on November 8.

On or about November 16, 2017, Mr. Alles called Mr. Bishop during which call Mr. Alles expressed Celgene’s interest, subject to due diligence, in considering a transaction to potentially acquire Juno at a price of $80.00 per

 

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share in cash, noting that Celgene might be able to go higher after performing due diligence, but that Celgene needed to first conduct sufficient due diligence before committing to a transaction or any specific proposal on price.

On November 17, 2017, Dr. Harr spoke with representatives of Party A in which Party A inquired whether Juno was having discussions with another party about an acquisition transaction. Dr. Harr responded that another party had approached Juno about a potential transaction, but that, while Juno was not actively seeking a sale or other strategic transaction, the Juno Board had also made no determination on the best path forward.

On November 17 and 18, 2017, Dr. Harr and Mr. Bishop called each member of the Strategic Committee to provide an update on the developments with Party A and Celgene and to align on response. All members were aligned in a view that $80.00 per share was inadequate to permit Celgene to start due diligence.

On November 20, 2017, Mr. Bishop informed Mr. Alles that the parties were too far apart on valuation for Juno to allow Celgene to commence due diligence. Mr. Alles reiterated that formal due diligence was necessary in order to consider and confirm Juno’s value and determine if a transaction was possible.

On November 21, 2017, Mr. Alles communicated to Mr. Bishop that Celgene was not able to improve on the $80.00 per share valuation. Mr. Bishop reiterated that Juno’s Strategic Committee was unanimous that $80.00 per share was inadequate to allow Celgene to move forward to start due diligence. Mr. Alles indicated that further discussions on valuation would not be meaningful without completion of a thorough due diligence investigation as it would be difficult for Celgene to complete a sum-of-the-parts analysis based on publicly available information that would lead to a valuation beyond $80.00 per share. Mr. Alles and Mr. Bishop agreed to schedule a meeting at the upcoming 2017 American Society of Hematology (ASH) Annual Meeting in December.

On November 22, 2017, Mr. Bishop spoke with Party A, during which Party A confirmed that it wanted to learn more about Juno’s pipeline. Party A also indicated that it needed more time and diligence to be able to confirm whether it would be willing to make an offer. Mr. Bishop responded that Juno was not conducting an auction process, but that another party was interested in potentially pursuing an acquisition transaction for Juno.

On November 27, 2017, Dr. Harr spoke with Party A regarding outstanding items that Party A desired in order to form a preliminary understanding of value.

On November 28, 2017, Mr. Alles informed Mr. Bishop that Juno could expect to receive Celgene’s view of potential next steps around December 13.

On December 5, 2017, Dr. Harr spoke with Party A, during which Party A indicated that it was not ready to offer a proposed value for an acquisition of Juno, but expressed renewed interest in a partnership related to BCMA. Dr. Harr indicated that it was unlikely Juno would be interested in a BCMA partnership at this time given other dialogues. Party A replied that it would do more work on a potential acquisition value.

On December 10, 2017, Mr. Bishop and Dr. Harr met with Mr. Alles and Dr. Golumbeski while at the ASH Annual Meeting in Atlanta, Georgia and discussed the possibility of an increased indication of interest from Celgene. Mr. Alles and Dr. Golumbeski reiterated the strategic rationale for the transaction and the potential to accelerate Juno’s platform within Celgene. Mr. Alles and Dr. Golumbeski informed Mr. Bishop and Dr. Harr that CAR-T and the role of cellular immunotherapy for cancer would be discussed at the regularly scheduled meeting of the Celgene board on December 13-14. Mr. Alles and Dr. Golumbeski asked if Juno could provide some guidance as to what price level would be needed for Juno to allow Celgene to perform customary due diligence. Later in the day, Dr. Harr spoke with Dr. Golumbeski and told him that Juno has a best-in-class platform and its expectation on value was consistent with this view.

On December 11, 2017, Mr. Bishop called Dr. Golumbeski to offer his availability should there be any additional follow-up questions prior to the meeting of the Celgene board on December 13-14.

 

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On December 14, 2017, Dr. Golumbeski informed Dr. Harr that Celgene would be, subject to due diligence, potentially interested in considering a transaction to acquire Juno at a price of $86.00 per share and that such due diligence might lead to a higher price per share. Dr. Golumbeski requested that due diligence begin and that any potential for an increased indication of interest would depend on finding additional value in due diligence in four areas: (1) Juno’s BCMA program; (2) JCAR017 (now also known as liso-cel); (3) Juno’s projected cost of goods; and (4) the projected value of Juno’s infringement lawsuit against Kite Pharma. Dr. Harr informed Dr. Golumbeski that management would discuss Celgene’s interest with the Strategic Committee and get back to him regarding Celgene’s indication of interest and the commencement of diligence. On the same day, Dr. Harr communicated Celgene’s indication of interest to Mr. Bishop and Mr. Bishop then spoke with each of the members of the Strategic Committee. The Strategic Committee decided in response to this proposal to permit Celgene to begin due diligence. The Strategic Committee also decided that management should reach out to Party A to inform them of increased urgency to understanding their intentions.

On December 15, 2017, Dr. Harr informed Party A that things were moving quickly with the other party with whom Juno was in discussions, and as a result, a BCMA-specific partnership was now likely off the table. Dr. Harr also told Party A that Juno would need to know if Party A was interested in a potential acquisition of Juno. Management of Party A indicated that they would discuss and get back to Dr. Harr on the matter.

On December 15, 2017, Dr. Harr called Dr. Golumbeski to advise that Juno would permit Celgene to commence due diligence based on the previously communicated indication of interest of $86.00 per share.

On December 19, 2017, Juno and Celgene entered into a letter agreement to add additional confidentiality obligations for transaction-related diligence activities to those already in place under the Juno-Celgene collaboration agreement, which was subsequently amended on December 21, 2017.

On December 19, 2017, Juno provided Celgene with access to an electronic data room. From December 19, 2017 through execution of the Merger Agreement, Celgene performed due diligence on Juno, including with respect to general and administrative matters, CMC, clinical research and development, regulatory matters, Juno’s research pipeline and commercial launch preparations. At this time, Juno did not provide Celgene with any potentially competitively sensitive information.

On December 19, 2017, members of senior management of Juno, including Mr. Bishop and Dr. Harr, gave a management presentation to representatives of Celgene concerning research, clinical development, manufacturing and commercial matters.

On December 20, 2017, the Strategic Committee held a meeting to discuss a potential strategic transaction. Management and representatives of each of Skadden and Morgan Stanley were also present. Management updated the Strategic Committee on progress of a potential transaction with Celgene, key items discussed with Celgene, certain factors that could affect Juno’s value, and a potential timeline for a potential transaction. Juno’s management informed the Strategic Committee that Juno’s financial model would be updated to reflect additional factors that could affect Juno’s value including an update to the competitive landscape following the 2017 ASH Annual Meeting, recent feedback from the FDA on Juno’s clinical development plans, and the anticipated passage of the tax reform bill by the U.S. Congress. Juno’s management informed the Strategic Committee that there had been no further discussions with Party A since the discussion on December 15. The Strategic Committee discussed with representatives of Morgan Stanley and Skadden whether or not to conduct a market check in light of developments. Representatives of Skadden provided information regarding the fiduciary duties of the Strategic Committee. The Strategic Committee decided not to conduct a market check at this time due to risks to Juno and any potential transaction in the event of a leak and the Strategic Committee’s view that a market check was unlikely to lead to a higher offer in light of the fact that no third parties had contacted Juno to express an interest in a potential acquisition following earlier public speculation and market rumors that Juno was potentially the subject of acquisition interest. The Strategic Committee also discussed termination fees and antitrust-related considerations with representatives of Skadden and Morgan Stanley, as well as the treatment of employee options in the context of a potential transaction with Celgene.

 

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On December 21, 2017, Party A informed Dr. Harr that it was not interested in a BCMA partnership or acquisition of Juno at this time. Dr. Harr informed the Strategic Committee of this outcome on the same day.

From December 21, 2017 to December 30, 2017, Dr. Harr and Dr. Angus Grant, Celgene’s Corporate Vice President, Business Development, had numerous communications to discuss diligence matters and Celgene’s objectives with respect to employee retention generally. Celgene considered broad employee retention an important component of value given the development stage of the technology, and dialogues on equity and compensation focused on this goal.

From December 24, 2017, to January 4, 2018, representatives of Juno and Celgene, including legal counsel, reviewed and negotiated a clean team agreement for the purposes of Juno sharing competitively and/or commercially sensitive information with representatives of Celgene for diligence purposes (the “Clean Team Agreement”). The Clean Team Agreement was executed on January 4, 2018.

On December 26, 2017, representatives of Skadden, counsel to Juno, delivered to representatives of Proskauer Rose LLP (“Proskauer”), counsel to Celgene, a draft Merger Agreement for a potential transaction between Juno and Celgene.

On December 27, 2017, the Strategic Committee held a meeting to discuss an update on the progress of a potential transaction. Representatives from Skadden and Morgan Stanley were also present. At the meeting, the Strategic Committee received an update from Juno’s management about the progress of the transaction, including with respect to the due diligence process, a possible timeline for the potential transaction, compensation matters with respect to the broader Juno employee base, the importance of employee stability, and post-transaction integration matters should a potential transaction with Celgene occur. Management also confirmed to the Strategic Committee that Party A was no longer interested in pursuing an acquisition.

On December 27, 2017, representatives of Skadden delivered an initial draft of Juno’s disclosure schedule to the Merger Agreement to representatives of Proskauer.

On December 31, 2017, Juno management provided to Celgene a “base” and “upside” revenue forecast for Juno for 2019 through 2030, which forecast excluded BCMA-related revenue.

On December 31, 2017, certain senior management of Juno, including Dr. Harr, had a call with Celgene to discuss Juno’s research priorities and updated progress since the last update Juno had provided to Celgene over the summer as part of their ongoing collaboration.

On January 1, 2018, Mr. Bishop, Dr. Harr, Mr. Alles, Dr. Golumbeski and Dr. Grant had a call. Mr. Alles reiterated the importance of completing due diligence in order to enable Celgene to present an offer for Juno. Mr. Alles indicated that the parties should nevertheless aim to get a revised view on value by January 5, 2018, with the possibility of announcing a transaction within the following two weeks.

On January 2, 2018, the Strategic Committee held a meeting to discuss an update on the progress of a potential transaction with Celgene. Representatives from Skadden and Morgan Stanley were also present. Juno’s management updated the Strategic Committee on the recent discussions with Celgene and presented an updated long-term financial model, which had been distributed to the members of the Strategic Committee in advance of the meeting. Juno’s management discussed changes from the previous model including updated assumptions related to competitive updates from the ASH Annual Meeting, recent FDA feedback, and the recent U.S. federal tax law changes relevant to Juno’s business. At the request of the Strategic Committee, representatives from Morgan Stanley presented an updated preliminary analysis of Juno’s valuation noting that the outcome of such analysis was not materially different from the preliminary analysis previously presented to the Strategic Committee on November 7, 2017, based on the assumptions utilized at such time. The Strategic Committee also discussed the parties’ respective obligations with respect to seeking antitrust approval of a potential transaction and designated an subcommittee consisting of Mr. Pien and Mrs. Wilderotter to review compensation related items and advise the rest of the Strategic Committee. After representatives from Morgan Stanley left the meeting,

 

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the Strategic Committee discussed and approved the transaction fee for Morgan Stanley in compensation for their services as financial advisor to Juno as part of the potential transaction with Celgene and authorized management to negotiate and enter into an engagement letter with Morgan Stanley on the terms discussed. Management subsequently executed an engagement letter with Morgan Stanley effective on January 4, 2018.

On January 3, 2018 representatives of Proskauer delivered a revised draft of the Merger Agreement to representatives of Skadden.

On January 3, 2018, Dr. Harr and Zachary Hale, Juno’s Vice President and Deputy General Counsel, met with representatives from Celgene, including Dr. Grant, Scott Smith, Celgene’s President and Chief Operating Officer, and Joe Hand, Celgene’s Senior Vice President, Global Human Resources and Corporate Services, to hear Celgene’s perspective on employee retention matters. In a separate meeting on Merger Agreement terms, Dr. Harr reiterated the importance of closing certainty to the Strategic Committee’s evaluation of any potential transaction. Dr. Grant proposed the possibility of a reverse termination fee as a potential resolution to address Juno’s desire for closing certainty.

On January 4, 2018, Celgene conducted on-site due diligence at Juno primarily pertaining to Juno’s process development and manufacturing capabilities.

On January 4, 2018, the compensation subcommittee of the Strategic Committee met to review Celgene’s feedback on its goals around equity and compensation as well as to review Juno management’s draft presentation with proposals to Celgene regarding equity acceleration, employee compensation matters between signing and closing and other retention matters. The proposal excluded Juno’s CEO and CFO. The subcommittee discussed the proposals at length, highlighting the importance of the stability of the employee base. The subcommittee directed management to send a proposal to Celgene that included a bonus pool of $20 million in the aggregate, from which awards would be allocated to employees in amounts determined by Mr. Bishop, the treatment of Juno’s new hires, preservation of Juno’s 2018 annual compensation review process in early 2018 and treatment of existing equity awards, including the potential for partial acceleration to allow for meaningful retention incentives for Juno employees while providing near-term value to existing employees. Juno management delivered the proposal to Celgene later that day.

On January 4, 2018, the Strategic Committee held a meeting to discuss an update on the progress of a potential transaction with Celgene. Juno’s management highlighted open areas of diligence and unresolved issues in the Merger Agreement, including the position of the parties on allocation of potential execution risks and potential avenues to resolve such issues.

On January 5, 2018, representatives of Skadden along with Bernard J. Cassidy, Juno’s General Counsel and Secretary, and Mr. Hale, had a telephonic meeting with representatives of Proskauer to negotiate various provisions of the draft Merger Agreement, including the covenant relating to the parties’ respective obligations to seek antitrust approval for the transaction, obligations to extend the tender offer and the conditions to the parties’ obligations to consummate the transaction. During this call, representatives of Proskauer informed Juno and representatives of Skadden that Celgene and its representatives had not completed a Freedom to Operate (“FTO”) analysis with respect to Juno’s patent portfolio and that such an analysis would be a required before an agreement could be executed.

On January 5, 2018, Dr. Harr called Dr. Grant to discuss the transaction, including the timeline and outstanding items.

On January 6, 2018, Dr. Golumbeski informed Mr. Bishop that Celgene had outstanding areas of diligence remaining and would not be ready to discuss valuation for at least another week. They also discussed open Merger Agreement items related to closing certainty and employee retention.

On January 6, 2018, representatives of Skadden delivered a revised draft of Juno’s disclosure schedules to the Merger Agreement to representatives of Proskauer.

 

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On January 7, 2018, the Strategic Committee held a meeting to discuss an update on the potential transaction and the key remaining outstanding items. Representatives from Juno management and Morgan Stanley were also present. At the meeting, management provided an update on the status of the potential transaction with Celgene. Juno’s management informed the Strategic Committee that certain due diligence items, including completion of an FTO analysis, remained. Juno’s management discussed with the Strategic Committee certain principal issues remaining open in the Merger Agreement, including the parties’ respective obligations in respect to seeking antitrust approval of the proposed transaction. The Strategic Committee discussed the possibility of a reverse termination fee to ensure closing certainty and instructed Juno management to negotiate an appropriate reverse termination fee with the assistance of representatives of Skadden and Morgan Stanley.

Also on January 7, 2018, after the meeting of the Strategic Committee, Mr. Bishop and Dr. Harr met with Mr. Alles, Dr. Golumbeski, Mr. Smith and Dr. Grant at the Annual J.P. Morgan Healthcare Conference in San Francisco, California. The parties discussed the importance to Celgene of resolving open diligence items in order to finalize the valuation included in its indication of interest to acquire Juno, and Juno reiterated the importance of closing certainty to Juno. Celgene management advised Juno management that Celgene would be announcing an executed transaction with another company the next day and assured Juno that it would not impact Celgene’s interest in pursuing a transaction with Juno.

On January 8, 2018, Dr. Harr spoke to Dr. Golumbeski about open items in the Merger Agreement and discussed a possible reverse termination fee. Dr. Harr proposed a structure focused around certain operating needs of Juno in such a scenario.

From January 10, 2018 through January 21, 2018, Dr. Harr and Dr. Golumbeski had multiple calls to discuss open Merger Agreement items, including the size of the termination fee and reverse termination fee. Dr. Harr initially proposed a reverse termination fee of $800 million. As a result of negotiations between the parties during this period, Dr. Golumbeski indicated that Celgene could offer a reverse termination fee payable to Juno of $600 million. Dr. Harr originally proposed a termination fee payable to Celgene of 2.25%. As a result of negotiations during this period, Dr. Golumbeski indicated that Celgene could potentially accept a termination fee payable to Celgene of $300 million.

From January 10, 2018, through execution of the Merger Agreement, representatives of Skadden continued to exchange with Proskauer revised drafts of the Merger Agreement and disclosure schedules reflecting the positions of Juno and Celgene discussed between the parties.

On January 12, 2018, Mr. Bishop spoke with Mr. Alles and Dr. Golumbeski and Dr. Grant spoke to Dr. Harr about remaining open items.

On January 13, 2018, the Strategic Committee held a meeting to discuss an update on the potential transaction and the key remaining outstanding items. Representatives from Juno management, Skadden and Morgan Stanley were also present. Juno management informed the Strategic Committee that Celgene’s diligence of Juno was almost complete. Juno’s management also informed the Strategic Committee that Juno and Celgene had come to terms on core elements of the calculation of a reverse termination fee.

On January 14, 2018, representatives of Skadden, along with Mr. Cassidy and Mr. Hale, had a telephonic meeting with representatives of Proskauer regarding the Merger Agreement. During the meeting it was agreed that certain open items would require a business principal level discussion between Juno and Celgene.

On January 16, 2018, after the Nasdaq Global Select Market had closed, The Wall Street Journal published a story stating that “Celgene Corp. is in talks to buy biotechnology company Juno Therapeutics Inc.” The trading price of Juno’s common stock on the following day increased to as high as $70.00 per share during trading hours before closing at $69.25 per share, compared to a closing price of $45.60 per share on the previous day.

On January 16, 2018, Dr. Harr and Dr. Golumbeski spoke several times about a potential transaction following publication of the story by The Wall Street Journal.

 

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On January 18, 2018, Dr. Harr and Dr. Golumbeski had a discussion about the valuation of Juno. While no formal offer was made, there was discussion about Celgene having difficulty reaching the previously indicated $86.00 indicative price per share based on a sum-of-the-parts analysis. Dr. Golumbeski raised the subject of a potential share price in the low $80s plus contingent value rights. Dr. Harr responded that contingent value rights were likely unacceptable, but management would raise the matter with the Strategic Committee.

On January 18, 2018, the Strategic Committee held a meeting to discuss an update on the potential transaction. Representatives of management, Skadden and Morgan Stanley also joined the meeting. The Strategic Committee and representatives from Skadden and Morgan Stanley discussed logistical and strategic considerations concerning any forthcoming price negotiations with Celgene, as well as potential responses to any definitive offer made by Celgene. Dr. Harr informed the Strategic Committee that Dr. Golumbeski raised the subject of contingent value rights, and the Strategic Committee determined that contingent value rights would not be acceptable because of their complexity, uncertain value, the likelihood that Celgene would seek to offer less than $86.00 per share in cash if contingent value rights were included, and the Strategic Committee’s belief that it would be in Juno stockholders’ best interest to receive certainty of value for their shares. The Strategic Committee instructed management to convey this determination to Celgene. Following this discussion, the Strategic Committee determined an increase in the offer price should be pursued. The Strategic Committee therefore instructed management to inform Celgene that the Strategic Committee expected an acquisition proposal to exceed $86.00 per share, as the Strategic Committee had allowed Celgene to conduct due diligence upon receipt of a preliminary proposal to acquire Juno for $86.00, and that Celgene had indicated that due diligence might allow it to increase its proposed price. The Strategic Committee also discussed recent media attention surrounding the potential transaction, the potential effects on the potential transaction and company employees and whether Juno had been contacted by potentially interested parties in the wake of The Wall Street Journal article. Management and representatives of Morgan Stanley confirmed there had been no such contacts with them, respectively.

Later that day, Dr. Harr called Dr. Golumbeski and informed him that the Strategic Committee required a specific proposal for value. Dr. Harr and Dr. Golumbeski scheduled a call for the next morning between themselves and Mr. Bishop and Mr. Alles. Dr. Harr also informed Dr. Golumbeski that the Strategic Committee was not receptive to contingent value rights. Mr. Bishop also contacted Mr. Alles by telephone and stated that there was a disconnect between the two companies regarding valuation. Mr. Alles stated that they would speak further the following day.

On January 19, 2018, Mr. Bishop and Dr. Harr spoke with Mr. Alles and Dr. Golumbeski. Dr. Harr indicated that the Strategic Committee would not view favorably any acquisition proposal by Celgene for an amount less than $86.00 per share, the amount at which Juno had agreed to allow Celgene to perform due diligence in order to potentially increase its bid, and that the Strategic Committee expected an increase. Mr. Alles reaffirmed Celgene’s interest at a price of $86.00 per share. Mr. Bishop agreed to inform the Strategic Committee of that price.

Later on January 19, 2018, the Strategic Committee held a meeting to discuss an update on the potential transaction. Representatives of management, Skadden and Morgan Stanley also joined the meeting. The Strategic Committee discussed the recent publication in The Wall Street Journal of a possible transaction between Juno and Celgene. Management informed the Strategic Committee that since that article was published in The Wall Street Journal, Juno had not been approached by any other potential counterparties to a transaction. At the request of the Strategic Committee, representatives of Morgan Stanley discussed with the Strategic Committee possible strategies for negotiating a higher price. At the meeting, representatives of Skadden reviewed the Strategic Committee’s fiduciary duty obligations. After discussion among the Strategic Committee with management excluded, the Strategic Committee agreed to authorize Juno’s management to push Celgene to increase the offer price to $88.00 per share. Mr. Pien contacted Mr. Bishop on behalf of the Strategic Committee in order to direct management to make such an effort.

 

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Following the Strategic Committee meeting on January 19, 2018, Mr. Bishop and Dr. Harr again spoke with Mr. Alles and Dr. Golumbeski. Mr. Bishop noted that the Strategic Committee had expected an increase in Celgene’s previous valuation of $86.00 per share and suggested that Celgene make an offer of $88.00 per share. Shortly thereafter, Mr. Alles and Dr. Golumbeski delivered an offer to Mr. Bishop and Dr. Harr for Celgene to acquire Juno for $87.00 per share. Mr. Alles and Dr. Golumbeski indicated that this offer was Celgene’s best and final offer.

Later on January 19, 2018, the Strategic Committee held a meeting to discuss Celgene’s revised offer. Representatives of management, Skadden and Morgan Stanley also joined the meeting. Juno’s management informed the Strategic Committee of Celgene’s best and final offer of $87.00 per share and a discussion ensued. The Committee authorized Juno’s management to inform Celgene that its offer to acquire all of the issued and outstanding shares of Juno was potentially acceptable subject to the resolution of the remaining items being negotiated between the parties.

Later on January 19, 2018, Dr. Harr and Mr. Bishop had a call with Mr. Alles and Dr. Golumbeski to communicate that Celgene’s final offer was potentially acceptable to the Strategic Committee subject to finalization of the Merger Agreement and confirmation of the termination fee and reverse termination fee, at the level previously indicated by Dr. Golumbeski.

On January 20, 2018, and January 21, 2018, representatives of management and Skadden communicated with representatives of Celgene and Proskauer to finalize agreement on open items in the Merger Agreement, including operating covenants, rights to extend the tender offer, and employee matters.

On January 21, 2018, the Strategic Committee held a meeting. Representatives of management, Skadden and Morgan Stanley also joined the meeting. Juno’s management updated the Strategic Committee on negotiations with Celgene. The Strategic Committee members expressed their views regarding the offer and discussed Juno’s strategic plan and the risks and potential rewards to Juno’s stockholders of remaining an independent company. The Strategic Committee also reviewed the final terms of the definitive Merger Agreement with representatives of Skadden. At the meeting, at the request of the Strategic Committee, representatives of Morgan Stanley presented a financial analysis of the $87.00 per Share offer, and rendered Morgan Stanley’s oral opinion to the Strategic Committee, which was subsequently confirmed by delivery of a written opinion to the Juno Board following the meeting held by the Juno Board on January 21, 2018, dated as of such date, to the effect that, as of such date and based on and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering such opinion as set forth therein, the consideration of the Offer Price of $87.00 in cash per Share proposed to be received by the holders of Shares (other than the holders of Excluded Shares (as defined in the Merger Agreement)) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders of Shares, as more fully described below in this Schedule 14D-9 under the caption “—Opinion of Juno’s Financial Advisor.” The Strategic Committee unanimously resolved to recommend that the Juno Board approve the potential transaction with Celgene, the Merger Agreement, the Offer, the Merger and all other transactions contemplated by the Merger Agreement, on the terms discussed at the meeting.

Immediately following the Strategic Committee meeting on January 21, 2018, the Juno Board held a meeting at which all members of the Juno Board other than Dr. Daniel and Dr. Vessey attended. Representatives of management, Skadden and Morgan Stanley also joined the meeting. At this meeting, the Juno Board received an update and analysis from Juno’s management, the Strategic Committee and representatives of Skadden regarding the potential transaction with Celgene. Mr. Pien, Chair of the Strategic Committee, reported to the Juno Board the Strategic Committee’s recommendation that the Juno Board approve the proposed transaction with Celgene. At the meeting, representatives of Morgan Stanley presented the financial analysis presented to the Strategic Committee earlier that day of the $87.00 per Share offer, and rendered Morgan Stanley’s oral opinion to the Juno Board, which was subsequently confirmed by delivery of a written opinion dated as of such date, to the effect that, as of such date and based on and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering such

 

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opinion as set forth therein, the consideration of the Offer Price of $87.00 in cash per Share proposed to be received by the holders of Shares (other than the holders of Excluded Shares (as defined in the Merger Agreement)) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders of Shares, as more fully described below in this Schedule 14D-9 under the caption “—Opinion of Juno’s Financial Advisor.” Representatives of Skadden then reviewed the final terms of the definitive Merger Agreement with the Juno Board. The Juno Board also discussed how since the publication of an article about a potential transaction between Juno and Celgene in The Wall Street Journal, no other potential counterparty to a strategic transaction had contacted Juno. After further consideration and consultation with its advisors, including consideration of the factors described below in this Schedule 14D-9 under the section “—Reasons for Recommendation,” by unanimous vote of the directors present (including each “independent” member of the Juno Board) (i) determined that the Offer and the Merger are advisable, fair to, and in the best interests of, Juno and its stockholders, (ii) approved in all respects the form, terms, provisions, and conditions of the Merger Agreement, including the transactions contemplated thereby, in the form presented or described to the Juno Board, (iii) approved the execution, delivery and performance by Juno of the Merger Agreement and the consummation of the transactions contemplated by the Merger Agreement, including the Offer and the Merger, (iv) recommended that Juno’s stockholders tender their Shares to Purchaser pursuant to the Offer and on the terms and subject to the conditions set forth in the Merger Agreement and (v) authorized the Chief Executive Officer and Chief Financial Officer of Juno to execute and deliver the Merger Agreement in the form presented to the Juno Board.

Following the conclusion of the meeting, Dr. Harr informed Dr. Golumbeski that the Juno Board had approved entering into the Merger Agreement.

Following the meeting of Celgene’s board of directors on January 21, 2018, Mr. Alles and Dr. Golumbeski informed Mr. Bishop and Dr. Harr that Celgene’s board of directors had approved entering into the Merger Agreement.

In the evening on January 21, 2018, Juno, Celgene and Purchaser executed and delivered the Merger Agreement. Juno and Celgene also modified the Voting and Standstill Agreement to provide a customary “fall away” provision that would cause the standstill provisions to be suspended upon the occurrence of specified events, including the entry into a definitive acquisition agreement with a third party other than Celgene or a tender offer or exchange offer initiated by any person other than Celgene or its affiliates in which Juno recommends acceptance of such tender offer or exchange offer.

Before the opening of trading on the Nasdaq Global Select Market on January 22, 2018, Juno and Celgene each filed a Current Report on Form 8-K and Juno and Celgene issued a joint press release announcing the execution of the Merger Agreement and the forthcoming commencement of the Offer to acquire all the outstanding Shares at a price of $87.00 per share in cash.

On February 2, 2018, Purchaser commenced the Offer and Juno filed this Schedule 14D-9.

Reasons for Recommendation

Strategic Committee

Each of the Strategic Committee and the Juno Board believes the Transaction is procedurally and substantively fair to Juno’s unaffiliated stockholders. The Strategic Committee, with the advice and assistance of Juno’s independent financial and legal advisors, evaluated and negotiated the proposal from Celgene, including the terms and conditions of the Merger Agreement and the transactions contemplated thereby, over the course of approximately three months. The Strategic Committee, by unanimous vote at a meeting held on January 21, 2018, determined that the Transaction is advisable, fair to and in the best interests of Juno’s stockholders. On that basis, the Strategic Committee recommended to the Juno Board that, in accordance with Delaware law, the Juno Board (i) approve the Transaction and declare the Transaction advisable to Juno and its stockholders, (ii) direct

 

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Juno to enter into and deliver the Merger Agreement, (iii) recommend that Juno’s stockholders tender their Shares to Purchaser pursuant to the Offer and (iv) agree to effect the Merger pursuant to Section 251(h) of the DGCL. In reaching its determination, the Strategic Committee consulted with and received the advice of and presentation from Juno’s legal advisors as to the terms of the Merger Agreement.

In determining that the Transaction is advisable, fair to and in the best interests of Juno’s stockholders, including the unaffiliated stockholders, and recommending the approval of the Merger Agreement and the Transaction to the Juno Board, the Strategic Committee considered a number of substantive factors, including the following non-exhaustive list of material reasons (not in any relative order of importance) that the Juno Board believes support its unanimous determination and recommendation:

 

    Business, Financial Condition and Prospects. The Strategic Committee considered the current and historical financial condition, results of operations, business, competitive position, properties, assets and prospects, as well as the long-range plan of Juno and the execution risks associated with the development, regulatory approval and commercialization of Juno’s product portfolio. The Strategic Committee weighed the certainty of realizing an upfront payment of $87.00 per Share in cash compared to the uncertainty that trading values would approach an amount comparable to the Offer Price in the foreseeable future and the risk and uncertainty associated with Juno and its business, including those described herein and those set forth in the Annual Report subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. These risks include risks related to potential difficulties in obtaining U.S. and non-U.S. regulatory approvals for Juno’s products, potential difficulties and delays in clinical trials of product candidates, regulatory developments involving Juno’s current and future products and product candidates and risks related to effectively commercializing Juno’s products in the U.S. and elsewhere in the world.

 

    Implied Premium. The Strategic Committee considered the current and historical market prices of the Shares, including the market performance of the Shares relative to those other participants in Juno’s industry and general market indices and the fact that the Offer Price represents a compelling premium to historical market prices of the Shares, including (i) a 91% premium over the closing price per Share of Juno’s Shares on the Nasdaq Global Select Market on January 16, 2018, the trading day before media speculation that Juno was involved in discussions regarding a potential transaction (the “Unaffected Date”), (ii) an 87% premium over the 30-day volume weighted average price (“VWAP”) of Juno’s Shares as of the Unaffected Date, (iii) a 76% premium over the 60-day VWAP of Juno’s Shares as of the Unaffected Date, (iv) a 37% premium over the Shares’ 52-week high and (v) a 28% premium over the closing price per Share of Juno’s Shares on the Nasdaq Global Select Market on January 19, 2018, the last full trading day prior to the public announcement of the Transaction.

 

    Certainty of Value. The Strategic Committee considered that the consideration to be received by Juno’s stockholders in the Offer and the Merger will consist entirely of cash, which provides certainty, immediate value and liquidity to Juno’s stockholders. The Strategic Committee believed this certainty of value was compelling, especially when viewed against the long-term value creation potential of Juno’s business and any internal or external risks and uncertainties associated with Juno’s standalone strategy.

 

    Reputation and Resources of Celgene. The Strategic Committee considered Celgene’s global commercial capabilities as well as its extensive experience and resources in developing and obtaining approval from the FDA for commercializing clinical stage biopharmaceutical product candidates.

 

   

Product Development and Regulatory Risks. The Strategic Committee considered the fact that none of Juno’s products have been approved yet for marketing by the FDA or any similar non-U.S. regulatory body as well as the status and prospects for Juno’s current pipeline, which is in early stages of research and development. The Strategic Committee also considered the risks inherent in the development of products for the treatment of cancer, the risks related to designing, conducting and compiling data from clinical trials, the risks related to seeking approval for marketing from the FDA and other regulatory

 

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authorities such as the European Medicines Agency (including any potential conditions or contingencies of such approvals), and other factors affecting the revenues and profitability of biotechnology products generally.

 

    Product Launch and Commercialization Risks. The Strategic Committee considered the significant risks and considerable costs associated with the successful launch and commercialization of Juno’s product candidates due, in part, to Juno’s lack of any global sales or marketing infrastructure or capabilities. The Strategic Committee also considered the uncertainty associated with market demand, pricing, including any reaction or pressure on pricing over time, governmental reimbursement and other factors beyond the control of Juno with respect to the product candidates in Juno’s pipeline, including the fact that Juno had never commercialized a product. In particular, the Strategic Committee considered the risk and uncertainty relating to cost of goods, sole suppliers and other third parties that are necessary for the manufacture and delivery of product candidates, the ability to obtain and maintain intellectual property protection for Juno’s product candidates and the expected increase in competition over time to Juno’s product candidates. The Strategic Committee also considered the significant challenges and costs to scale commercialization globally, including in the European Union, particularly given the patient-by-patient manufacturing process for Juno’s products and the reliance on well-resourced hospitals to deliver the therapy.

 

    Existing Resources. The Strategic Committee considered the fact that Juno may require additional capital in order to complete the remaining clinical development for its product candidates and potentially commercialize these product candidates, as well as fund its other ongoing operations. The Strategic Committee also took into consideration that, while Juno may seek additional funding through future debt and equity financing or additional collaborations or strategic partnerships, any such fundraising could be highly dilutive to Juno’s existing stockholders, might be available only on unfavorable terms, or might not be available at all.

 

    Negotiation Process. The Strategic Committee considered the fact that the terms of the Offer and Merger were the result of robust negotiations conducted by Juno with the knowledge and at the direction of the Strategic Committee and with the assistance of independent financial and legal advisors. The Strategic Committee also considered the enhancements that Juno and its advisors were able to obtain as a result of robust negotiations with Celgene, including the increase in the valuation suggested by Celgene from the time of its initial expression of interest to the end of the negotiations and the inclusion of provisions in the Merger Agreement that increase the likelihood of completing the Offer and consummating the Merger.

 

    Potentially Interested Counterparties. The Strategic Committee considered the process conducted by Juno, with the assistance of representatives of Morgan Stanley, to identify potential buyers. In particular, the Strategic Committee considered the fact that only one other party expressed interest in potentially acquiring Juno, and that such party determined not to proceed with a transaction with Juno. The Strategic Committee also considered, after discussions with representatives of Morgan Stanley and senior management, that (i) a broader outreach to potential acquirers could delay a potential transaction and cause significant disruption at a critical stage of Juno’s development, putting at risk a transaction with Celgene at the price negotiated, (ii) management had met with other potential partners and that such potential partners had not approached Juno to inquire about a strategic transaction with Juno, (iii) no potentially interested counterparties contacted Juno in the wake of pre-announcement media speculation with regard to the Transaction and (iv) should any such potential counterparty be interested in pursuing a transaction on terms more favorable to Juno and its stockholders than those contemplated by the Merger Agreement, such counterparty would be able to pursue such an offer for Juno despite Juno’s entry into a Merger Agreement with Celgene.

 

   

Strategic Alternatives. The Strategic Committee considered its analysis, after discussions with representatives of Morgan Stanley, of the possible alternatives to the Merger, including: (i) the execution of senior management’s standalone plan, with or without potential strategic collaborations

 

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and (ii) the risk that Celgene could pursue an alternative transaction. In particular, the Strategic Committee considered the risks and costs associated with designing and conducting future clinical trials for its product candidates and seeking and obtaining regulatory approvals for such product candidates, building a commercial infrastructure, hiring or leasing a sales force, launching and marketing its product candidates in the United States and other markets and continuing the development of its other pipeline products.

 

    Industry and Economy. The Strategic Committee considered the current state of the economy and assessed the stage of the pharmaceutical industry cycle, financing markets, uncertainty in drug pricing and uncertainty surrounding forecasted economic conditions, both in the near term and the long term, generally and within Juno’s industry in particular.

 

    Certain Management Projections. The Strategic Committee considered certain forecasts for Juno prepared by senior management of Juno and approved by the Strategic Committee, which reflected an application of various clinical and commercial assumptions of Juno’s senior management. For further discussion, see “—Certain Financial Projections.

 

    Opinion of Juno’s Financial Advisor. The Strategic Committee considered the oral opinion of Morgan Stanley rendered to the Juno Board on January 21, 2018, and subsequently confirmed by delivery of a written opinion dated as of such date, to the effect that, as of such date and based on and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley in rendering such opinion as set forth therein, the consideration of the Offer Price of $87.00 in cash per Share proposed to be received by the holders of Shares (other than the holders of Excluded Shares (as defined in the Merger Agreement)) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders of Shares, as more fully described under the caption “—Opinion of Juno’s Financial Advisor.

 

    Speed and Likelihood of Consummation. The Strategic Committee considered that the structure of the Transaction as a two-step transaction effected pursuant to Section 251(h) of the DGCL without the adoption of the Merger Agreement by Juno’s stockholders enables Juno’s stockholders to receive the Offer Price pursuant to the Offer in a relatively short time frame. The Strategic Committee also considered the likelihood that the Offer would be completed and the Merger would be consummated based on, among other things (not in any relative order of importance):

 

    the fact that, subject to its circumscribed rights to terminate the Offer, Purchaser is required to extend the Offer beyond the initial expiration date of the Offer if certain conditions related to approval under the HSR Act are not satisfied as of such date;

 

    the fact that the completion of the Offer is conditioned on meeting the Minimum Condition, which cannot be waived without the prior written consent of Juno;

 

    the fact that there is no financing condition to the completion of the Offer and consummation of the Merger;

 

    the fact that there are not expected to be significant antitrust or other regulatory impediments, other than review pursuant to the HSR Act;

 

    the business reputation, capabilities and financial condition of Celgene, including Celgene’s ability to finance to fund the Offer Price with cash, and the Strategic Committee’s perception that Celgene is willing and able to devote the resources necessary to complete the Offer and the Merger in an expeditious manner; and

 

    the availability of the remedy of specific performance to Juno under the Merger Agreement, in the event of breaches by Celgene and Purchaser.

 

   

Other Terms of the Merger Agreement. The Strategic Committee considered other terms of the Merger Agreement, as more fully described in “—Special Factors—Summary of the Merger Agreement” in the

 

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Offer to Purchase. Certain provisions of the Merger Agreement that the Strategic Committee considered important included:

 

    Ability to Respond to Unsolicited Acquisition Proposals. At any time prior to the time Purchaser accepts for payment Shares tendered and not validly withdrawn pursuant to the Offer, the Juno Board may, if prior to taking such actions the Juno Board determines in good faith, after consultation with its independent financial advisor and legal counsel, that a written, unsolicited Acquisition Proposal (as defined in the Merger Agreement) from a third party is or would reasonably be expected to lead to a Superior Offer (as defined in the Merger Agreement) and that the failure to take such actions would be inconsistent with the directors’ fiduciary duties under applicable legal requirements, furnish information with respect to Juno and engage in or otherwise participate in discussions or negotiations with the person or group of persons making such Acquisition Proposal (as more fully described in the section “—Special Factors—Summary of the Merger Agreement—No Solicitation” in the Offer to Purchase).

 

    Change of Recommendation in Response to a Superior Offer; Ability to Accept a Superior Offer. If the Juno Board determines in good faith, after consultation with its independent financial advisor and legal counsel, that an unsolicited written Acquisition Proposal (as defined in the Merger Agreement) constitutes a Superior Offer (as defined in the Merger Agreement) and that the failure to take such action would be inconsistent with its fiduciary duties under applicable legal requirements, the Juno Board may take a number of actions, including withdrawing, withholding, modifying or qualifying in a manner adverse to Celgene or Purchaser the Juno Board’s recommendation that the stockholders of Juno tender their Shares to Purchaser pursuant to the Offer. Juno may terminate the Merger Agreement and enter into an alternative acquisition agreement with respect to a Superior Offer, subject to Juno’s payment to Celgene or its designee of a termination fee of $300 million and to Juno’s compliance with additional terms of the Merger Agreement (as more fully described in the sections “—Special Factors—Summary of the Merger Agreement—No Solicitation”; “ —Special Factors—Summary of the Merger Agreement—Recommendation Change”; “—Special Factors—Summary of the Merger Agreement—Termination” in the Offer to Purchase).

 

    Change of Recommendation in Response to an Intervening Event. If the Juno Board, other than in connection with an Acquisition Proposal (as defined in the Merger Agreement), determines in good faith, after consultation with its independent financial advisor and legal counsel, that the failure to do so would be inconsistent with the Juno Board’s fiduciary duties to Juno’s stockholders under applicable legal requirements, the Juno Board may in response to an Intervening Event (as defined in the Merger Agreement) take a number of actions, including withdrawing, withholding, modifying or qualifying in a manner adverse to Celgene or Purchaser the Juno Board’s recommendation that the stockholders of Juno tender their Shares to Purchaser pursuant to the Offer (as more fully described in the section “—Special Factors—Summary of the Merger Agreement—Recommendation Change” in the Offer to Purchase). An intervening event is generally, with some exceptions, an event that materially affects Juno’s business, assets or operations that occurs after the date of the Merger Agreement and that was not known or reasonably foreseeable to the Juno Board. Celgene is entitled to terminate the Merger Agreement in the event that the Juno Board changes its recommendation for any reason, in which event Juno will have an obligation to pay to Celgene or its designee the termination fee of $300 million (as more fully described in the sections “—Special Factors—Summary of the Merger Agreement—Termination” and “—Special Factors—Summary of the Merger Agreement—Juno Termination Fee” in the Offer to Purchase).

 

   

Extension of the Offer. Purchaser’s obligation to accept for and pay for all Shares that have been validly tendered into the Offer and not validly withdrawn is subject to the satisfaction or waiver of a number of conditions; however, Purchaser is required to extend the Offer beyond the initial expiration date by (i) periods of up to 15 business days per extension, until any waiting period

 

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(and any extension thereof) applicable to the consummation of the Offer under the HSR Act and any foreign antitrust or competition-related legal requirement expires or terminates, (ii) any applicable period required by any legal requirement, any interpretation or position of the SEC, its staff or the Nasdaq Global Select Market, (iii) an additional period of up to 10 business days per extension, on one or more occasions, if, as of the scheduled expiration date, any condition to the Offer other than the Minimum Condition is not satisfied or waived, and the Merger Agreement is not terminated per its terms, to permit such condition to be satisfied, provided that any such condition is capable of being satisfied on or before the End Date and (iv) an additional period of up to 10 business days per extension, on one or more occasions, if, as of the scheduled expiration date, the only condition that has not been satisfied is the Minimum Condition, in order to allow the Minimum Condition to be satisfied (provided, however, that Purchaser shall not be required to extend the Offer on more than three occasions that provide, in the aggregate, for an additional period of at least 30 business days to allow the Minimum Condition to be satisfied).

 

    Cooperation in Obtaining Regulatory Clearance. The Merger Agreement requires Celgene and Juno to use their reasonable best efforts to obtain regulatory clearance.

 

    Celgene Termination Fee. If the Merger Agreement is terminated under certain circumstances where the conditions to the Offer related to approvals under the HSR Act have not been satisfied, Celgene will be required to pay Juno a reverse termination fee of $600 million. The Strategic Committee believed this remedy would provide Juno with sufficient resources to continue operations as a standalone entity in the near term.

 

    Material Adverse Effect. The scope of matters that are specifically excluded from consideration in determining whether a “Material Adverse Effect” has occurred. In particular, any event generally affecting the industries in which Juno and its subsidiaries operate, or the economy generally, or other general business, financial, market, regulatory or political conditions in the United States or elsewhere in the world to the extent such event does not materially disproportionately affect Juno relative to other participants in the industries in which Juno operates is excluded from the determination of whether a “Material Adverse Effect” has occurred.

 

    Appraisal Rights. Statutory appraisal rights under Delaware law in connection with the Merger will be available to stockholders who do not tender their Shares in the Offer and who otherwise comply with all required procedures under Delaware law. For a description of these appraisal rights, see information under the heading “Item 8. Additional Information—Appraisal Rights.”

The Strategic Committee also considered a variety of risks and potentially negative factors in its deliberations concerning the Transaction, including the following (not in any relative order of importance):

 

    No Ongoing Equity Interest in Juno. The Offer and the Merger would preclude Juno’s stockholders from having the opportunity to directly participate in the future performance of Juno’s assets. However, the Strategic Committee considered that Celgene is a public company and Juno stockholders would have the choice to invest in Celgene separately.

 

    Inability to Solicit Takeover Proposals. The Merger Agreement includes covenants requiring Juno not to solicit, or in engage in discussions with third parties relating to a potential Acquisition Proposal (as defined in the Merger Agreement) during the period between signing and closing, subject to certain exceptions consistent with fulfillment of certain fiduciary requirements. The Strategic Committee also considered the fact that the right afforded to Celgene under the Merger Agreement to have four business days to match an Acquisition Proposal (and an additional two business days if there are any changes to the financial or other material terms) that the Strategic Committee determines, in good faith, is a Superior Offer (as defined in the Merger Agreement), may discourage other parties that might otherwise have an interest in a business combination with, or an acquisition of, Juno. In addition, the Strategic Committee considered the foregoing in light of the fact that the Strategic Committee had not asked that Morgan Stanley solicit interest from potential buyers with regard to a strategic transaction.

 

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    The Termination Fee. Juno may be required to pay the $300 million termination fee if the Merger Agreement is terminated under certain circumstances, including by Juno to accept a Superior Offer (as defined in the Merger Agreement). The Strategic Committee considered the risk that the amount of the termination fee would deter a potential Acquisition Proposal (as defined in the Merger Agreement).

 

    Effect of Announcement. The potential effect of the public announcement of the Transaction on Juno’s operations, employees and stock price, as well as its ability to attract and retain key personnel while the Transaction is pending.

 

    Litigation Risk. The risk of litigation in connection with the execution of the Merger Agreement, the completion of the Offer and the consummation of the Merger.

 

    Interim Operating Covenants. The Merger Agreement imposes restrictions on the conduct of Juno’s business prior to the consummation of the Merger, requiring Juno to conduct its business in the ordinary course and refrain from taking specified actions. The Strategic Committee considered that such restrictions may delay or prevent Juno from pursuing business strategies or opportunities that may arise pending consummation of the Merger.

 

    Risk that the Minimum Condition Might Not Be Satisfied. The possibility that Juno’s stockholders will tender an insufficient number of Shares to meet the Minimum Condition, and the fact that Purchaser’s obligation to extend the Offer if the Minimum Condition is not satisfied as of the expiration date of the Offer (where all other conditions to the Offer are satisfied or waived) is limited to an aggregate extension of 30 business days.

 

    Transaction Costs. Significant costs have been and will continue to be incurred in connection with negotiating and entering into the Merger Agreement and completing the Offer and the Merger, and substantial time and effort of management will be required, potentially resulting in disruptions to the operation of Juno’s business.

 

    Potential Conflicts of Interest. The Strategic Committee considered the potential conflict of interest created by the fact that Juno’s executive officers and directors have financial interests in the Offer and the Merger that may be different from or in addition to those of other stockholders, as more fully described in “Item 3. Past Contacts, Transactions, Negotiations and Agreements—Arrangements between Juno and its Executive Officers, Directors and Affiliates.

 

    Risks the Offer and the Merger May Not Be Completed. Although Juno expects that the Offer will be completed and the Merger will be consummated, there can be no assurance that all conditions to the parties’ obligations will be satisfied. The Strategic Committee considered the risk that (i) conditions to the parties’ obligations to complete the Offer or the Merger may not be satisfied, (ii) consummation may be unduly delayed or (iii) the Offer or the Merger may not otherwise be consummated despite the parties’ efforts. The Strategic Committee also considered the potential resulting disruptions to Juno’s business in the event the Offer and the Merger are not consummated, including the diversion of management and employee attention, employee attrition and the effect on licensors, licensees, lessors, governmental bodies and others that do business with Juno and the potential effect on the trading price of the Shares.

 

    Regulatory Approval and Risk of Pending Actions. The risks associated with the need to make antitrust filings, and obtain antitrust consents and approvals, in the United States, and the fact that the Merger Agreement provides that neither party will be required to effect any sale, license, divestiture or disposition of, or any other structural, behavioral or conduct remedy with respect to, or restriction on the conduct or operation of any entity, business, division, operation, product or product line, asset or intellectual property right, as well as a condition that there be no pending legal proceeding by any governmental body prohibiting the acceptance for payment of Shares pursuant to the Offer or the Merger or making the consummation of the Offer or the Merger illegal.

 

    Tax Treatment. The fact that the gains realized by Juno’s stockholders as a result of the Offer and the Merger generally will be taxable to the stockholders for U.S. federal income tax purposes.

 

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In view of the variety of reasons considered in connection with its evaluation of the Merger, the Strategic Committee did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific reasons considered in reaching its determination and recommendation. The Strategic Committee did not undertake to make any specific determination as to whether any reason, or any particular aspect of any reason, supported or did not support its ultimate determination. Rather, the directors made their determinations and recommendations based on the totality of the information presented to them, and the judgments of individual members of the Strategic Committee may have been influenced to a greater or lesser degree by different factors. The Juno Board concluded that the risks, uncertainties, restrictions and potentially negative factors associated with the Offer and Merger were substantially outweighed by the potential benefits of the Offer and Merger.

In considering the fairness of the Transaction, the Strategic Committee considered a discounted cash flow analysis, as more fully discussed under the heading “—Opinion of Juno’s Financial Advisor.” The Strategic Committee also considered historical and current market prices. The Strategic Committee did not consider Juno’s net book value, which is defined as total assets minus total liabilities, attributable to Juno’s stockholders, as a factor. The Strategic Committee believed that net book value is not a material indicator of the value of Juno as a going concern because it does not take into account Juno’s future prospects, market conditions, trends in the biotechnology industry or the business risks inherent in competing with other companies in that industry. The Strategic Committee also did not consider the liquidation value of Juno in determining the fairness of the transaction to Juno’s stockholders because the Strategic Committee believed that the orderly sale of the Juno’s assets for cash and the subsequent distribution of proceeds therefrom was not a practical alternative to the Transaction. Other than as described above under the heading “—Background of the Transaction,” Juno is not aware of any firm offers made by any unaffiliated person, during the past two years for (i) the merger or consolidation of Juno with or into another company or vice versa, (ii) the sale or other transfer of all or a substantial part of Juno’s assets or (iii) the purchase of Juno’s voting securities that would enable the holder to exercise control over Juno. The foregoing discussion of the information and factors considered and given weight by Juno is not intended to be exhaustive, but is believed to include the material factors considered by Juno. The Strategic Committee did not consider the purchase prices paid by Juno in previous purchases during the past two years because the Strategic Committee did not consider those prices to represent the best available indicator of Juno’s value but rather to be indicative of historical prices over such two-year period.

The Strategic Committee did not retain an unaffiliated representative to act solely on behalf of the unaffiliated stockholders for purposes of negotiating the terms of the Transaction. The Strategic Committee believes that sufficient procedural safeguards were and are present to ensure the fairness of the Transaction and to permit the Strategic Committee to represent effectively the interests of Juno’s unaffiliated stockholders, which the Strategic Committee believes supports its decision and provides assurance of the fairness of the Transaction to Juno’s stockholders. The Strategic Committee believes that the process it followed in making its determination and recommendation with respect to Transaction was fair because, among other things:

 

    The Strategic Committee consists solely of directors of Juno who are not controlling stockholders or affiliated with Celgene or Purchaser, and who do not otherwise have a conflict of interest or lack independence with respect to the Transaction.

 

    The members of the Strategic Committee will not personally benefit from the completion of the Merger in a manner different from Juno’s stockholders, continuing indemnification of directors and officer liability insurance coverage and certain Options will automatically vest and certain vested RSUs will settle upon a change of control.

 

    The Strategic Committee was advised by legal counsel Skadden.

 

    The Strategic Committee was advised by Juno’s independent financial advisor, Morgan Stanley, which assisted the Strategic Committee in its review of the financial aspects of the proposal and the Strategic Committee’s evaluation of the fairness of the $87.00 per Share cash Offer Price and Merger Consideration to the holders of Shares (other than to the holders of Excluded Shares (as defined in the Merger Agreement)) pursuant to the Merger Agreement.

 

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    The resolutions of the Juno Board establishing the Strategic Committee delegated to the Strategic Committee all the power and authority of the Juno Board, to the fullest extent permitted by the DGCL, to review, consider, negotiate, reject, terminate, enter into agreements in the furtherance of, and recommend to the Juno Board for approval the terms and conditions of any transaction outside of the ordinary course of business with the potential to increase stockholder value.

 

    The fact that the Offer and the Merger are subject to the Minimum Condition, which condition cannot be waived by any party.

 

    The Strategic Committee was involved in extensive deliberations for a period of three months until the execution of the Merger Agreement and was provided with access to Juno’s management in connection with the due diligence conducted by its advisors over the course that period.

 

    The Strategic Committee, with the assistance of its independent financial advisor and legal counsel, extensively negotiated with Celgene and its respective representatives and advisors.

 

    The recognition by the Strategic Committee that the Merger Agreement can be terminated to allow Juno to enter into an alternative proposal that constitutes a Superior Proposal and that the Juno Board can change its recommendation in favor of the Transaction due to an Intervening Event (as those terms are defined in the Merger Agreement), subject to paying Celgene the termination fee.

 

    The availability to Juno’s stockholders of appraisal rights as provided in the DGCL.

Board of Directors

The Juno Board believes that the Transaction is advisable, fair to and in the best interests of Juno’s stockholders. A majority of the directors of Juno who are not employees of Juno voted to approve the Transaction (with Dr. Rupert Vessey and Dr. Thomas O. Daniel recusing themselves from such vote due to their current and former affiliation, respectively, with Celgene). The Juno Board adopted the analyses and determinations of the Strategic Committee in its evaluation of the fairness of the Transaction. In determining the reasonableness of the Strategic Committee’s analysis and the fairness of the Transaction, the Juno Board considered and relied upon the following factors, among others:

 

    The Strategic Committee’s unanimous determination that the Transaction is advisable, fair to and in the best interests of Juno’s stockholders, and its unanimous approval of, and recommendation that the Juno Board approve the Transaction and the performance by Juno of its obligations under the Merger Agreement, upon the terms and conditions contained in the Merger Agreement.

 

    That no member of the Strategic Committee has an interest in the Transaction different from that of Juno’s stockholders except that (i) as directors, each member of the Strategic Committee will receive customary director and officer insurance coverage and (ii) Options and RSUs held by the non-employee directors will, by their terms, vest and/or be paid in full upon a change of control.

 

    The oral opinion of Morgan Stanley rendered to the Juno Board at the meeting on January 21, 2018, and subsequently confirmed by delivery of a written opinion dated as of such date, to the effect that, that as of such date and based on and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley in rendering such opinion as set forth therein, the consideration of the Offer Price of $87.00 in cash per Share proposed to be received by the holders of Shares (other than to the holders of Excluded Shares (as defined in the Merger Agreement)) in the Offer and the Merger pursuant to the Merger Agreement was fair from a financial point of view to such holders of Shares, as more fully described under the heading “—Opinion of Juno’s Financial Advisor” below.

The foregoing discussion of the information and factors considered by the Juno Board is not intended to be exhaustive, but includes the material factors considered by the Juno Board, including the substantive and procedural factors considered by the Strategic Committee discussed above. In view of the variety of factors

 

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considered in connection with its evaluation of the Offer and the Merger, the Juno Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its conclusion. In addition, each of the members of the Juno Board applied his own personal business judgment to the process and may have given differing weights to different factors. In arriving at their recommendation, the members of the Juno Board also considered the interests certain executive officers of Juno may have with respect to the Offer and the Merger that differ from, or are in addition to, their interests as stockholders generally, as described under “Item 3. Past Contacts, Transactions, Negotiations and Agreements” above. The Juno Board approves the Merger Agreement and recommends that Juno’s stockholders tender their Shares to Purchaser pursuant to the Offer based upon the totality of the information presented to, and considered by, the Juno Board.

Intent to Tender

To Juno’s knowledge, after making reasonable inquiry, all of Juno’s executive officers and directors currently intend to tender or cause to be tendered pursuant to the Offer all Shares held of record or beneficially owned by such persons immediately prior to the expiration of the Offer, as it may be extended (other than Shares for which such holder does not have discretionary authority). The foregoing does not include any Shares over which, or with respect to which, any such executive officer or director acts in a fiduciary or representative capacity or is subject to the instructions of a third party with respect to such tender.

Certain Financial Projections

While Juno has from time to time provided limited full-year financial guidance to investors, which may have covered, among other items, anticipated cash burn, Juno’s management does not, as a matter of course, otherwise publicly disclose forecasts or internal projections as to future performance, or results of operations, earnings or other results due to among other things the inherent difficulty of predicting financial performance for future periods and the likelihood that the underlying assumptions and estimates may not be realized. However, as part of the due diligence review of Celgene and Purchaser, Juno’s senior management prepared certain non-public, unaudited prospective financial information for fiscal years 2018 through 2035, including product-level performance detail for fiscal years 2018 through 2035 (the “Non-Risk Adjusted Projections”), and also risk-adjusted these projections by estimating future commercialization metrics with respect to Juno’s clinical-stage candidates (the “Risk-Adjusted Projections” and, together with the Non-Risk Adjusted Projections, the “Management Projections”), which were reviewed with the Juno Board. The Management Projections were provided to the Juno Board in considering, analyzing and evaluating the Offer and the Merger, as well as potential strategic alternatives for Juno. In addition, the Management Projections were provided to Morgan Stanley, Juno’s financial advisor, and the Risk-Adjusted Projections contained in the January 2018 Projections (as defined below) were relied upon by Morgan Stanley in connection with the rendering of Morgan Stanley’s fairness opinions to the Juno Board and in performing the related financial analyses as described above under “—Opinion of Juno’s Financial Advisor” and were the only financial projections with respect to Juno used by Morgan Stanley in performing such financial analyses.

Juno is electing to summarize the Management Projections in this Schedule 14D-9 to provide holders of Shares access to certain nonpublic prospective commercialization information that was made available to the Juno Board for purposes of considering and evaluating Celgene’s proposal. Juno’s management provided certain of the Non-Risk Adjusted Projections to Celgene. Juno makes and has made no representation to Celgene or Purchaser, in the Merger Agreement or otherwise, concerning any projections.

The Management Projections were based upon certain financial, operating and commercial assumptions developed solely using the information available to Juno’s management at the time the respective Management Projections were created.

 

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Cautionary Note About the Management Projections

The Management Projections, while necessarily presented with numerical specificity, were based on numerous variables and assumptions that are inherently uncertain and many of which are beyond Juno’s control. The Management Projections reflect numerous estimates and assumptions made by Juno’s management, based on information available at the time the Management Projections were developed, with respect to industry performance and competition, regulatory conditions, general business, economic, market and financial conditions and matters specific to Juno’s product candidates, all of which are difficult to predict and many of which are beyond Juno’s control. As a result, there can be no assurance that the Management Projections accurately reflect future trends or accurately estimate the future market for Juno’s product candidates. There can be no assurance of the approval, or timing of such approval, of any of Juno’s clinical-stage product candidates, and it is possible that other therapeutic scenarios will be preferable. The Management Projections also reflect assumptions as to certain business decisions that are subject to change. Important factors that may affect actual results and result in the Management Projections not being achieved include, but are not limited to, the timing of regulatory approvals and introduction of new products, market acceptance of new products, success of clinical testing, availability of third-party reimbursement, impact of competitive products and pricing, the effect of regulatory actions, the effect of global economic conditions, fluctuations in foreign currency exchange rates, the cost and effect of changes in tax and other legislation and other risk factors described in Juno’s annual report on Form 10-K for the fiscal year ended December 31, 2016, subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. In addition, the Management Projections may be affected by Juno’s ability to achieve strategic goals, objectives and targets over the applicable periods. Further, the Management Projections cover multiple years and, by their nature, become subject to greater uncertainty with each successive year. Accordingly, there can be no assurance that the Management Projections will be realized, and actual results may vary materially from those shown.

Modeling and forecasting the future commercialization of clinical stage drug candidates is a highly speculative endeavor. In addition to the various limitations described above, there can also be no assurance that Juno will obtain and maintain any of the regulatory approvals necessary for the commercialization of its product candidates, or that Juno’s competitors will not commercialize products that are safer, more effective, or more successfully marketed and sold than any product that Juno may commercialize. Since the Management Projections cover a long period of time, the Management Projections by their nature are unlikely to anticipate each circumstance that will have an effect on the commercial value of Juno’s product candidates.

In light of the foregoing factors and the uncertainties inherent in the Management Projections, holders of Shares are cautioned not to place undue, if any, reliance on the Management Projections. The Management Projections were not prepared with a view toward public disclosure. The inclusion of the Management Projections in this Schedule 14D-9 should not be regarded as an indication that Juno or any of its affiliates, advisors or representatives considered or consider the Management Projections to be predictive of actual future events, and the Management Projections should not be relied upon as such or construed as financial guidance. Neither Juno nor any of its affiliates assumes any responsibility for the accuracy of this information. Neither Juno nor any of its respective affiliates, advisors, officers, directors or representatives can give any assurance that actual results will not differ from the Management Projections, and none of them undertakes any obligation to update or otherwise revise or reconcile the Management Projections to reflect circumstances existing after the date the Management Projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the Management Projections are shown to be in error. Juno does not intend to make publicly available any update or other revision to the Management Projections, except as otherwise required by law. Neither Juno nor any of its respective affiliates, advisors, officers, directors or representatives has made or makes any representation or warranty to any holders of Shares or other person regarding the ultimate performance of Juno compared to the information contained in the Management Projections, the likelihood that the Management Projections will be achieved, the results of Juno’s clinical trials, the effectiveness or marketability of Juno’s product candidates or the overall future performance of Juno. The Management Projections were prepared based on Juno’s continued operation as a stand-alone company and do not take into account the Offer, including the potential synergies that may be achieved by the combined company

 

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as a result of the Offer or the effect of any business or strategic decision or action that has been or will be taken as a result of the execution of the Merger Agreement. The Management Projections are subjective in many respects and is thus subject to interpretation. Please refer to “Item 8. Additional Information—Forward-Looking Statements” below.

The Management Projections were not prepared with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or U.S. generally accepted accounting principles (“GAAP”). Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Juno may not be comparable to similarly titled amounts used by other companies. In addition, the Management Projections were not prepared with the assistance of, or reviewed, compiled or examined by, independent accountants. The Management Projections are not being included in this Schedule 14D-9 to influence any stockholder’s decision whether to tender his, her or its Shares in the Offer, but instead because the Management Projections were provided to the Juno Board and to Morgan Stanley to evaluate the transactions contemplated by the Merger Agreement. The Management Projections may differ from publicly available analyst estimates, and the Management Projections do not take into account any events or circumstances after the date they were prepared, including the announcement of the Offer and Merger.

JUNO DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE MANAGEMENT PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE MANAGEMENT FORECASTS ARE NO LONGER APPROPRIATE.

Base Case, Upside Case, Downside Case

The Management Projections consist of Risk-Adjusted Projections and Non-Risk-Adjusted Projections and, under each, further consist of three cases—a base case, an upside case and a downside case. Each of the base case, upside case and downside case assumes JCAR017, JCARH125 and existing pipeline candidates are clinically developed and pursued. Further, the Management Projections include the impact of platform R&D spend and associated return, which is characterized as other income (expense).

Each set of base case projections were prepared assuming Juno’s continued operation as a stand-alone, publicly traded company and assuming that each of JCAR017 and JCARH125 enters into a competitive, multi-player market with a competitive profile. Upside case projections generally assume higher CAR-T penetration and higher share for JCAR017, JCARH125 and the pipeline candidates relative to the base case and downside case projections generally assume lower CAR-T penetration and lower share for JCAR017, JCARH125 and the pipeline candidates relative to the base case. Assumptions regarding multiple factors distinguish the base, upside, and downside cases, including but not limited to: balance of efficacy and safety profile; rate of adoption of cellular therapies in earlier lines of therapy; reach and rate of adoption by site of care (including outpatient and community setting); and manufacturing capacity.

November 2017 Projections

In November 2017, Juno’s management prepared certain Management Projections, as summarized below, and provided them to the Juno Board and Morgan Stanley (the “November 2017 Projections”). As described below, the November 2017 Projections were subsequently updated by Juno management (as so updated, the “January 2018 Projections”), which January 2018 Projections were ultimately adopted by the Juno Board and were relied upon by Morgan Stanley as the basis for the rendering of its fairness opinion described in “—Opinion of Juno’s Financial Advisor” (and were the only financial projections with respect to Juno used by Morgan Stanley in rendering such opinion). Morgan Stanley used the Risk-Adjusted Projections contained in the November 2017

 

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Projections to calculate unlevered free cash flow, tax shield from segments with negative earnings before taxes and tax savings from net operating losses with respect to the Risk-Adjusted Projections contained in the November 2017 Projections. Morgan Stanley did not calculate any financial metrics with respect to any Non-Risk-Adjusted Projections. The November 2017 Projections were not provided to Celgene.

Risk-Adjusted Projections—Base Case—November 2017 Projections

(Amounts in Millions)

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

Total Net Sales

  $ 17     $ 244     $ 958     $ 1,822     $ 2,481     $ 3,032     $ 3,582     $ 4,081     $ 4,605     $ 5,065     $ 5,567     $ 6,060     $ 6,446     $ 6,791     $ 7,115     $ 7,442     $ 7,786     $ 8,147  

Cost of Goods Sold

  $ —       $ (63   $ (233   $ (412   $ (553   $ (664   $ (775   $ (736   $ (814   $ (878   $ (949   $ (1,016   $ (1,069   $ (1,116   $ (1,155   $ (1,193   $ (1,233   $ (1,275

Total Gross Profit

  $ 17     $ 181     $ 725     $ 1,410     $ 1,928     $ 2,368     $ 2,807     $ 3,345     $ 3,791     $ 4,187     $ 4,617     $ 5,044     $ 5,377     $ 5,675     $ 5,960     $ 6,249     $ 6,553     $ 6,872  

EBIT

  $ (342   $ (303   $ 157     $ 771     $ 1,224     $ 1,612     $ 2,205     $ 2,647     $ 3,113     $ 3,485     $ 3,952     $ 4,353     $ 4,661     $ 4,932     $ 5,189     $ 5,447     $ 5,721     $ 6,008  

Net Income Incl.
NOL Adj. (1)

  $ (421   $ (375   $ 52     $ 659     $ 885     $ 1,066     $ 1,330     $ 1,672     $ 1,827     $ 2,271     $ 2,781     $ 3,245     $ 3,645     $ 4,019     $ 4,384     $ 4,750     $ 5,126     $ 5,511  

Portfolio Unlevered Free Cash Flows (2)

  $ (374   $ (380   $ (67   $ 349     $ 642     $ 896     $ 1,339     $ 1,574     $ 1,883     $ 2,182     $ 2,487     $ 2,776     $ 3,023     $ 3,227     $ 3,419     $ 3,596     $ 3,776     $ 3,965  

Platform Unlevered Free Cash Flows (3)

  $ (78   $ (72   $ (105   $ (112   $ (163   $ (67   $ (277   $ (224   $ (465   $ (194   $ 54     $ 241     $ 429     $ 616     $ 804     $ 991     $ 1,179     $ 1,366  

Tax Shield from EBT Negative Segments (4)

  $ 5     $ 14     $ 126     $ 115     $ 174     $ 163     $ 171     $ 168     $ 228     $ 148     $ 92     $ 97     $ 102     $ 107     $ 112     $ 118     $ 124     $ 130  

Tax Savings from NOLs (5)

  $ —       $ —       $ 16     $ 204     $ 153     $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —    

 

(1) Net income including NOL adjustment includes tax-effected annual platform R&D expense and tax-effected platform R&D return, with such return based on the market data inputs and related weighted average cost of capital assumptions assumed in the November 7, 2017 Juno Board materials. Includes impact of Tax Attributes. Figures shown reflect November 7, 2017 Juno Board materials.
(2) Portfolio unlevered free cash flow calculated as earnings before interest and taxes from named drugs and royalty streams, less taxes at the effective tax rate, less capital expenditures, plus depreciation and amortization and less changes in net working capital. Unlevered free cash flow does not include cash flow associated with Tax Attributes. Figures shown reflect November 7, 2017 Juno Board materials.
(3)  Platform unlevered free cash flow calculated as return on platform investment net of platform R&D expenses less taxes at the effective tax rate, Platform unlevered free cash flow does not include cash flow associated with Tax Attributes. Figures shown reflect November 7, 2017 Juno Board materials.
(4)  Tax shield from EBT negative segments represents the tax savings resulting from loss bearing product lines; calculated as the difference between tax liability on a product line basis relative to tax liability on a consolidated basis. Figures shown reflect November 7, 2017 Juno Board materials.
(5) Tax savings from NOLs represent the cash flows associated with utilization of net operation losses. Figures shown reflect November 7, 2017 Juno Board materials.

In addition, as part of such base case Risk-Adjusted Projections, Juno prepared the risk-adjusted product level revenue projections as set forth below.

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

JCAR017 US Revenue

  $ —       $ 199     $ 855     $ 1,504     $ 1,907     $ 2,147     $ 2,323     $ 2,586     $ 2,858     $ 3,030     $ 3,194     $ 3,366     $ 3,548     $ 3,739     $ 3,941     $ 4,154     $ 4,378     $ 4,614  

JCAR017 Ex-US Royalty

  $ —       $ —       $ 12     $ 72     $ 132     $ 164     $ 178     $ 184     $ 198     $ 212     $ 215     $ 216     $ 218     $ 219     $ 221     $ 222     $ 224     $ 225  

JCARH125 Net Revenue

  $ —       $ —       $ 8     $ 131     $ 325     $ 604     $ 929     $ 1,093     $ 1,184     $ 1,307     $ 1,403     $ 1,465     $ 1,523     $ 1,584     $ 1,648     $ 1,716     $ 1,787     $ 1,862  

Other Royalty Revenue

  $ 16     $ 45     $ 83     $ 116     $ 116     $ 116     $ 127     $ 139     $ 149     $ 155     $ 162     $ 169     $ 152     $ 131     $ 136     $ 142     $ 148     $ 153  

JCAR024 (ROR-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 5     $ 14     $ 38     $ 63     $ 110     $ 162     $ 197     $ 221     $ 232     $ 240     $ 248     $ 257  

JCAR020 (MUC-16)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 6     $ 17     $ 41     $ 64     $ 91     $ 117     $ 133     $ 144     $ 149     $ 154     $ 158     $ 163  

JTCR016 (WT-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 9     $ 28     $ 86     $ 149     $ 246     $ 348     $ 413     $ 458     $ 479     $ 496     $ 513     $ 532  

LeY

  $ —       $ —       $ —       $ —       $ —       $ —       $ 5     $ 16     $ 39     $ 61     $ 103     $ 149     $ 180     $ 202     $ 212     $ 220     $ 228     $ 236  

JTCR018 (HPV)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 1     $ 4     $ 13     $ 23     $ 44     $ 67     $ 83     $ 93     $ 97     $ 99     $ 102     $ 105  

 

40


Risk-Adjusted Projections—Upside Case—November 2017 Projections

(Amounts in Millions)

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

Total Net Sales

  $ 20     $ 357     $ 1,414     $ 2,674     $ 3,696     $ 4,812     $ 6,114     $ 7,594     $ 9,014     $ 9,927     $ 10,430     $ 10,880     $ 11,335     $ 11,813     $ 12,335     $ 12,885     $ 13,463     $ 14,071  

Cost of Goods Sold

  $ —       $ (97   $ (354   $ (618   $ (845   $ (1,084   $ (1,337   $ (1,366   $ (1,583   $ (1,718   $ (1,785   $ (1,841   $ (1,900   $ (1,961   $ (2,024   $ (2,090   $ (2,159   $ (2,231

Total Gross Profit

  $ 20     $ 260     $ 1,061     $ 2,056     $ 2,851     $ 3,727     $ 4,777     $ 6,228     $ 7,432     $ 8,209     $ 8,644     $ 9,038     $ 9,435     $ 9,852     $ 10,311     $ 10,794     $ 11,304     $ 11,840  

EBIT

  $ (339   $ (223   $ 492     $ 1,296     $ 2,035     $ 2,901     $ 4,216     $ 5,641     $ 6,823     $ 7,578     $ 7,979     $ 8,348     $ 8,718     $ 9,109     $ 9,539     $ 9,993     $ 10,472     $ 10,975  

Net Income Incl. NOL Adj. (1)

  $ (417   $ (295   $ 387     $ 1,044     $ 1,292     $ 1,956     $ 2,718     $ 3,738     $ 4,387     $ 5,095     $ 5,559     $ 6,001     $ 6,444     $ 6,901     $ 7,386     $ 7,886     $ 8,404     $ 8,939  

Portfolio Unlevered Free Cash Flows(2)

  $ (372   $ (314   $ 131     $ 647     $ 1,122     $ 1,690     $ 2,479     $ 3,251     $ 4,121     $ 4,863     $ 5,308     $ 5,595     $ 5,844     $ 6,106     $ 6,391     $ 6,695     $ 7,015     $ 7,352  

Platform Unlevered Free Cash Flows(3)

  $ (78   $ (72   $ (105   $ (112   $ (163   $ (67   $ (277   $ (224   $ (465   $ (194   $ 54     $ 241     $ 429     $ 616     $ 804     $ 991     $ 1,179     $ 1,366  

Tax Shield from EBT Negative Segments (4)

  $ 6     $ 16     $ 123     $ 135     $ 209     $ 184     $ 162     $ 149     $ 228     $ 148     $ 92     $ 97     $ 102     $ 107     $ 112     $ 118     $ 124     $ 130  

Tax Savings from
NOLs (5)

  $ —       $ —       $ 120     $ 227     $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —    

 

(1) Net income including NOL adjustment includes tax-effected annual platform R&D expense and tax-effected platform R&D return, with such return based on the market data inputs and related weighted average cost of capital assumptions assumed in the November 7, 2017 Board materials. Includes impact of Tax Attributes. Figures shown reflect November 7, 2017 Juno Board materials.
(2) Portfolio unlevered free cash flow calculated as earnings before interest and taxes from named drugs and royalty streams, less taxes at the effective tax rate, less capital expenditures, plus depreciation and amortization and less changes in net working capital. Unlevered free cash flow does not include cash flow associated with Tax Attributes. Figures shown reflect November 7, 2017 Juno Board materials.
(3) Platform unlevered free cash flow calculated as return on platform investment net of platform R&D expenses less taxes at the effective tax rate, Platform unlevered free cash flow does not include cash flow associated with Tax Attributes. Figures shown reflect November 7, 2017 Juno Board materials.
(4) Tax shield from EBT negative segments represents the tax savings resulting from loss bearing product lines; calculated as the difference between tax liability on a product line basis relative to tax liability on a consolidated basis. Figures shown reflect November 7, 2017 Juno Board materials.
(5) Tax savings from NOLs represent the cash flows associated with utilization of net operation losses. Figures shown reflect November 7, 2017 Juno Board materials.

In addition, as part of such upside case Risk-Adjusted Projections, Juno prepared the risk-adjusted product level revenue projections as set forth below.

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

JCAR017 US Revenue

  $ —       $ 306     $ 1,291     $ 2,205     $ 2,810     $ 3,372     $ 3,728     $ 4,137     $ 4,531     $ 4,782     $ 5,040     $ 5,313     $ 5,600     $ 5,903     $ 6,222     $ 6,558     $ 6,913     $ 7,287  

JCAR017 Ex-US Royalty

  $ —       $ —       $ 18     $ 110     $ 194     $ 243     $ 279     $ 294     $ 309     $ 322     $ 324     $ 326     $ 328     $ 330     $ 333     $ 335     $ 337     $ 339  

JCARH125 Net Revenue

  $ —       $ —       $ 17     $ 247     $ 597     $ 1,108     $ 1,668     $ 1,991     $ 2,255     $ 2,473     $ 2,589     $ 2,685     $ 2,785     $ 2,890     $ 3,000     $ 3,117     $ 3,239     $ 3,367  

Other Royalty Revenue

  $ 20     $ 51     $ 89     $ 112     $ 96     $ 89     $ 100     $ 111     $ 116     $ 120     $ 125     $ 130     $ 118     $ 104     $ 109     $ 113     $ 118     $ 123  

JCAR024 (ROR-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 67     $ 209     $ 356     $ 441     $ 465     $ 480     $ 496     $ 512     $ 530     $ 548     $ 567     $ 587  

JCAR020 (MUC-16)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 46     $ 142     $ 238     $ 291     $ 304     $ 313     $ 322     $ 331     $ 341     $ 351     $ 362     $ 373  

JTCR016 (WT-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 137     $ 430     $ 732     $ 908     $ 959     $ 990     $ 1,024     $ 1,058     $ 1,095     $ 1,133     $ 1,173     $ 1,215  

LeY

  $ —       $ —       $ —       $ —       $ —       $ —       $ 61     $ 191     $ 324     $ 401     $ 423     $ 437     $ 452     $ 468     $ 485     $ 502     $ 520     $ 539  

JTCR018 (HPV)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 29     $ 89     $ 153     $ 191     $ 200     $ 205     $ 210     $ 216     $ 221     $ 227     $ 234     $ 240  

 

41


Risk-Adjusted Projections—Downside Case—November 2017 Projections

(Amounts in Millions)

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

Total Net Sales

  $ 12     $ 86     $ 409     $ 875     $ 1,267     $ 1,580     $ 1,850     $ 2,064     $ 2,255     $ 2,425     $ 2,610     $ 2,798     $ 2,933     $ 3,080     $ 3,227     $ 3,379     $ 3,539     $ 3,706  

Cost of Goods Sold

  $ —       $ (16   $ (90   $ (186   $ (269   $ (333   $ (386   $ (359   $ (387   $ (410   $ (434   $ (458   $ (479   $ (498   $ (515   $ (532   $ (551   $ (569

Total Gross Profit

  $ 12     $ 70     $ 319     $ 689     $ 997     $ 1,247     $ 1,464     $ 1,705     $ 1,868     $ 2,015     $ 2,176     $ 2,341     $ 2,455     $ 2,582     $ 2,712     $ 2,847     $ 2,988     $ 3,137  

EBIT

  $ (347   $ (414   $ (249   $ 41     $ 293     $ 491     $ 861     $ 1,007     $ 1,189     $ 1,313     $ 1,520     $ 1,660     $ 1,748     $ 1,848     $ 1,950     $ 2,055     $ 2,166     $ 2,282  

Net Income Incl. NOL Adj. (1)

  $ (426   $ (486   $ (354   $ (70   $ 130     $ 424     $ 584     $ 728     $ 499     $ 773     $ 1,103     $ 1,387     $ 1,635     $ 1,891     $ 2,149     $ 2,409     $ 2,673     $ 2,941  

Portfolio Unlevered Free
Cash Flows(2)

  $ (377   $ (472   $ (315   $ (130   $ 30     $ 157     $ 462     $ 518     $ 653     $ 762     $ 894     $ 996     $ 1,069     $ 1,139     $ 1,212     $ 1,280     $ 1,349     $ 1,422  

Platform Unlevered Free Cash Flows(3)

  $ (78   $ (72   $ (105   $ (112   $ (163   $ (67   $ (277   $ (224   $ (465   $ (194   $ 54     $ 241     $ 429     $ 616     $ 804     $ 991     $ 1,179     $ 1,366  

Tax Shield from EBT Negative Segments (4)

  $ 4     $ 11     $ 24     $ 113     $ 180     $ 163     $ 176     $ 183     $ 238     $ 148     $ 92     $ 97     $ 102     $ 107     $ 112     $ 118     $ 124     $ 130  

Tax Savings from NOLs (5)

  $ —       $ —       $ —       $ —       $ 40     $ 132     $ 181     $ 188     $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —    

 

(1) Net income including NOL adjustment includes tax-effected annual platform R&D expense and tax-effected platform R&D return, with such return based on the market data inputs and related weighted average cost of capital assumptions assumed in the November 7, 2017 Juno Board materials. Includes impact of Tax Attributes. Figures shown reflect November 7, 2017 Juno Board materials.
(2) Portfolio unlevered free cash flow calculated as earnings before interest and taxes from named drugs and royalty streams, less taxes at the effective tax rate, less capital expenditures, plus depreciation and amortization and less changes in net working capital. Unlevered free cash flow does not include cash flow associated with Tax Attributes. Figures shown reflect November 7, 2017 Juno Board materials.
(3) Platform unlevered free cash flow calculated as return on platform investment net of platform R&D expenses less taxes at the effective tax rate, Platform unlevered free cash flow does not include cash flow associated with Tax Attributes. Figures shown reflect November 7, 2017 Juno Board materials.
(4) Tax shield from EBT negative segments represents the tax savings resulting from loss bearing product lines; calculated as the difference between tax liability on a product line basis relative to tax liability on a consolidated basis. Figures shown reflect November 7, 2017 Juno Board materials.
(5) Tax savings from NOLs represent the cash flows associated with utilization of net operation losses. Figures shown reflect November 7, 2017 Juno Board materials.

In addition, as part of such downside case Risk-Adjusted Projections, Juno prepared the risk-adjusted product level revenue projections as set forth below.

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

JCAR017 US Revenue

  $ —       $ 52     $ 329     $ 683     $ 946     $ 1,103     $ 1,213     $ 1,309     $ 1,407     $ 1,503     $ 1,591     $ 1,678     $ 1,769     $ 1,865     $ 1,966     $ 2,073     $ 2,185     $ 2,304  

JCAR017 Ex-US Royalty

  $ —       $ —       $ 3     $ 27     $ 58     $ 80     $ 90     $ 95     $ 98     $ 101     $ 104     $ 105     $ 106     $ 107     $ 107     $ 108     $ 109     $ 110  

JCARH125 Net Revenue

  $ —       $ —       $ 4     $ 56     $ 144     $ 273     $ 406     $ 494     $ 537     $ 559     $ 580     $ 602     $ 625     $ 650     $ 676     $ 703     $ 731     $ 761  

Other Royalty Revenue

  $ 12     $ 34     $ 73     $ 108     $ 119     $ 125     $ 133     $ 143     $ 151     $ 159     $ 166     $ 173     $ 146     $ 139     $ 144     $ 150     $ 156     $ 162  

JCAR024 (ROR-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 1     $ 4     $ 11     $ 18     $ 31     $ 46     $ 56     $ 63     $ 66     $ 68     $ 71     $ 73  

JCAR020 (MUC-16)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 2     $ 5     $ 12     $ 18     $ 26     $ 34     $ 38     $ 41     $ 43     $ 44     $ 45     $ 47  

JTCR016 (WT-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 3     $ 8     $ 25     $ 43     $ 70     $ 99     $ 118     $ 131     $ 137     $ 142     $ 147     $ 152  

LeY

  $ —       $ —       $ —       $ —       $ —       $ —       $ 2     $ 5     $ 11     $ 17     $ 29     $ 43     $ 52     $ 58     $ 61     $ 63     $ 65     $ 67  

JTCR018 (HPV)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 0     $ 1     $ 4     $ 7     $ 12     $ 19     $ 24     $ 27     $ 28     $ 28     $ 29     $ 30  

Non-Risk-Adjusted Projections—Base Case—November 2017 Projections

(Amounts in Millions)

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

Total Net Sales

  $ 19     $ 274     $ 1,112     $ 2,268     $ 3,307     $ 4,373     $ 5,859     $ 8,382     $ 12,026     $ 15,008     $ 18,332     $ 21,478     $ 23,661     $ 25,327     $ 26,501     $ 27,590     $ 28,734     $ 29,936  

Cost of Goods Sold

  $ —       $ (70   $ (269   $ (512   $ (739   $ (958   $ (1,255   $ (1,502   $ (2,083   $ (2,526   $ (3,034   $ (3,494   $ (3,807   $ (4,048   $ (4,200   $ (4,338   $ (4,481   $ (4,631

Total Gross Profit

  $ 19     $ 204     $ 843     $ 1,755     $ 2,568     $ 3,416     $ 4,604     $ 6,880     $ 9,944     $ 12,482     $ 15,297     $ 17,984     $ 19,853     $ 21,279     $ 22,301     $ 23,252     $ 24,253     $ 25,305  

EBIT

  $ (353   $ (340   $ 120     $ 808     $ 1,411     $ 1,898     $ 3,393     $ 4,895     $ 8,349     $ 10,857     $ 14,301     $ 16,954     $ 18,789     $ 20,178     $ 21,162     $ 22,074     $ 23,035     $ 24,045  

Net Income Incl.
NOL Adj. (1)

  $ (431   $ (412   $ 15     $ 696     $ 1,029     $ 1,263     $ 2,150     $ 3,223     $ 5,440     $ 7,357     $ 9,922     $ 11,940     $ 13,393     $ 14,539     $ 15,405     $ 16,222     $ 17,072     $ 17,957  

 

(1) Net income including NOL adjustment includes tax-effected annual platform R&D expense and tax-effected platform R&D return, with such return based on the market data inputs and related weighted average cost of capital assumptions assumed in the November 7, 2017 Juno Board materials. Includes impact of Tax Attributes.

 

42


In addition, as part of such base case Non-Risk-Adjusted Projections, Juno prepared the non-risk-adjusted product level revenue projections as set forth below.

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

JCAR017 US Revenue

  $ —       $ 221     $ 983     $ 1,802     $ 2,400     $ 2,770     $ 3,133     $ 4,622     $ 6,199     $ 6,712     $ 7,075     $ 7,457     $ 7,859     $ 8,284     $ 8,731     $ 9,203     $ 9,700     $ 10,224  

JCAR017 Ex-US Royalty

  $ —       $ —       $ 13     $ 83     $ 158     $ 207     $ 230     $ 251     $ 379     $ 505     $ 524     $ 528     $ 531     $ 535     $ 539     $ 542     $ 546     $ 550  

JCARH125 Net Revenue

  $ —       $ —       $ 14     $ 237     $ 601     $ 1,241     $ 2,038     $ 2,456     $ 2,977     $ 3,861     $ 4,459     $ 4,700     $ 4,880     $ 5,070     $ 5,269     $ 5,479     $ 5,699     $ 5,931  

Other Royalty Revenue

  $ 19     $ 53     $ 101     $ 146     $ 148     $ 156     $ 194     $ 266     $ 311     $ 330     $ 347     $ 361     $ 335     $ 264     $ 274     $ 285     $ 297     $ 308  

JCAR024 (ROR-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 46     $ 139     $ 377     $ 627     $ 1,096     $ 1,620     $ 1,969     $ 2,211     $ 2,317     $ 2,396     $ 2,479     $ 2,566  

JCAR020 (MUC-16)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 56     $ 167     $ 408     $ 641     $ 911     $ 1,174     $ 1,331     $ 1,437     $ 1,491     $ 1,536     $ 1,582     $ 1,631  

JTCR016 (WT-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 95     $ 285     $ 859     $ 1,493     $ 2,457     $ 3,476     $ 4,127     $ 4,577     $ 4,790     $ 4,957     $ 5,133     $ 5,317  

LeY

  $ —       $ —       $ —       $ —       $ —       $ —       $ 53     $ 159     $ 388     $ 612     $ 1,027     $ 1,491     $ 1,803     $ 2,021     $ 2,121     $ 2,197     $ 2,276     $ 2,360  

JTCR018 (HPV)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 13     $ 38     $ 127     $ 228     $ 436     $ 671     $ 826     $ 930     $ 969     $ 995     $ 1,022     $ 1,050  

Non-Risk-Adjusted Projections—Upside Case—November 2017 Projections

(Amounts in Millions)

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

Total Net Sales

  $ 25     $ 404     $ 1,650     $ 3,370     $ 5,040     $ 7,249     $ 12,898     $ 23,783     $ 35,447     $ 42,032     $ 44,372     $ 46,047     $ 47,766     $ 49,548     $ 51,483     $ 53,516     $ 55,651     $ 57,894  

Cost of Goods Sold

  $ —       $ (108   $ (410   $ (777   $ (1,157   $ (1,633   $ (2,628   $ (4,020   $ (5,853   $ (6,893   $ (7,241   $ (7,463   $ (7,695   $ (7,937   $ (8,189   $ (8,453   $ (8,728   $ (9,015

Total Gross Profit

  $ 25     $ 296     $ 1,240     $ 2,593     $ 3,884     $ 5,615     $ 10,270     $ 19,764     $ 29,595     $ 35,139     $ 37,131     $ 38,584     $ 40,071     $ 41,611     $ 43,294     $ 45,063     $ 46,924     $ 48,879  

EBIT

  $ (347   $ (248   $ 517     $ 438     $ 1,607     $ 3,397     $ 9,480     $ 18,899     $ 28,700     $ 34,213     $ 36,135     $ 37,554     $ 39,007     $ 40,510     $ 42,155     $ 43,885     $ 45,705     $ 47,619  

Net Income Incl.
NOL Adj. (1)

  $ (426   $ (319   $ 412     $ 327     $ 1,125     $ 2,298     $ 6,350     $ 12,886     $ 19,482     $ 23,473     $ 24,987     $ 26,153     $ 27,343     $ 28,568     $ 29,891     $ 31,272     $ 32,715     $ 34,223  

 

(1) Net income including NOL adjustment includes tax-effected annual platform R&D expense and tax-effected platform R&D return, with such return based on the market data inputs and related weighted average cost of capital assumptions assumed in the November 7, 2017 Juno Board materials. Includes impact of Tax Attributes.

In addition, as part of such upside case Non-Risk-Adjusted Projections, Juno prepared the non-risk-adjusted product level revenue projections as set forth below.

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

JCAR017 US Revenue

  $ —       $ 340     $ 1,486     $ 2,646     $ 3,578     $ 4,541     $ 5,286     $ 7,612     $ 9,730     $ 10,320     $ 10,879     $ 11,468     $ 12,089     $ 12,744     $ 13,434     $ 14,162     $ 14,929     $ 15,738  

JCAR017 Ex-US Royalty

  $ —       $ —       $ 20     $ 126     $ 232     $ 309     $ 375     $ 413     $ 547     $ 656     $ 664     $ 669     $ 673     $ 678     $ 682     $ 687     $ 692     $ 696  

JCARH125 Net Revenue

  $ —       $ —       $ 30     $ 449     $ 1,103     $ 2,273     $ 3,667     $ 4,907     $ 6,879     $ 8,492     $ 9,053     $ 9,376     $ 9,716     $ 10,072     $ 10,447     $ 10,840     $ 11,253     $ 11,688  

Other Royalty Revenue

  $ 24     $ 65     $ 114     $ 149     $ 128     $ 126     $ 172     $ 245     $ 258     $ 254     $ 264     $ 276     $ 248     $ 196     $ 205     $ 214     $ 223     $ 232  

JCAR024 (ROR-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 667     $ 2,085     $ 3,555     $ 4,410     $ 4,652     $ 4,802     $ 4,959     $ 5,124     $ 5,296     $ 5,477     $ 5,666     $ 5,865  

JCAR020 (MUC-16)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 458     $ 1,417     $ 2,385     $ 2,906     $ 3,045     $ 3,130     $ 3,219     $ 3,312     $ 3,409     $ 3,511     $ 3,617     $ 3,728  

JTCR016 (WT-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 1,374     $ 4,299     $ 7,320     $ 9,081     $ 9,586     $ 9,904     $ 10,236     $ 10,584     $ 10,949     $ 11,331     $ 11,732     $ 12,152  

LeY

  $ —       $ —       $ —       $ —       $ —       $ —       $ 611     $ 1,910     $ 3,241     $ 4,006     $ 4,229     $ 4,372     $ 4,523     $ 4,681     $ 4,847     $ 5,021     $ 5,203     $ 5,394  

JTCR018 (HPV)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 287     $ 894     $ 1,533     $ 1,908     $ 2,001     $ 2,051     $ 2,103     $ 2,158     $ 2,215     $ 2,274     $ 2,336     $ 2,400  

Non-Risk-Adjusted Projections—Downside Case—November 2017 Projections

(Amounts in Millions)

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

Total Net Sales

  $ 13     $ 96     $ 482     $ 1,081     $ 1,639     $ 2,199     $ 2,807     $ 3,487     $ 4,389     $ 5,216     $ 6,165     $ 7,100     $ 7,729     $ 8,251     $ 8,638     $ 9,004     $ 9,389     $ 9,793  

Cost of Goods Sold

  $ —       $ (18   $ (107   $ (231   $ (351   $ (467   $ (587   $ (603   $ (745   $ (869   $ (1,004   $ (1,135   $ (1,230   $ (1,304   $ (1,353   $ (1,398   $ (1,445   $ (1,494

Total Gross Profit

  $ 13     $ 77     $ 376     $ 850     $ 1,288     $ 1,732     $ 2,219     $ 2,884     $ 3,644     $ 4,348     $ 5,161     $ 5,964     $ 6,499     $ 6,947     $ 7,285     $ 7,606     $ 7,944     $ 8,299  

EBIT

  $ (359   $ (466   $ (347   $ (185   $ 132     $ 214     $ 1,009     $ 900     $ 2,049     $ 2,722     $ 4,203     $ 4,973     $ 5,473     $ 5,884     $ 6,185     $ 6,467     $ 6,764     $ 7,076  

Net Income Incl.
NOL Adj. (1)

  $ (438   $ (538   $ (452   $ (296   $ (31   $ 147     $ 732     $ 676     $ 1,281     $ 1,744     $ 2,954     $ 3,672     $ 4,205     $ 4,676     $ 5,071     $ 5,453     $ 5,846     $ 6,249  

 

(1) Net income including NOL adjustment includes tax-effected annual platform R&D expense and tax-effected platform R&D return, with such return based on the market data inputs and related weighted average cost of capital assumptions assumed in the November 7, 2017 Juno Board materials. Includes impact of Tax Attributes.

 

43


In addition, as part of such downside case Non-Risk-Adjusted Projections, Juno prepared the non-risk-adjusted product level revenue projections as set forth below.

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

JCAR017 US Revenue

  $ —       $ 57     $ 389     $ 818     $ 1,161     $ 1,403     $ 1,584     $ 1,856     $ 2,215     $ 2,538     $ 2,740     $ 2,890     $ 3,047     $ 3,213     $ 3,387     $ 3,572     $ 3,766     $ 3,970  

JCAR017 Ex-US Royalty

  $ —       $ —       $ 3     $ 32     $ 69     $ 98     $ 115     $ 124     $ 142     $ 167     $ 186     $ 193     $ 194     $ 195     $ 197     $ 198     $ 199     $ 201  

JCARH125 Net Revenue

  $ —       $ —       $ 6     $ 102     $ 266     $ 543     $ 858     $ 1,071     $ 1,171     $ 1,220     $ 1,266     $ 1,314     $ 1,364     $ 1,418     $ 1,474     $ 1,532     $ 1,594     $ 1,659  

Other Royalty Revenue

  $ 13     $ 38     $ 84     $ 128     $ 144     $ 155     $ 176     $ 212     $ 244     $ 263     $ 280     $ 293     $ 250     $ 232     $ 241     $ 251     $ 261     $ 270  

JCAR024 (ROR-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 13     $ 40     $ 108     $ 179     $ 313     $ 463     $ 563     $ 632     $ 662     $ 685     $ 708     $ 733  

JCAR020 (MUC-16)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 16     $ 48     $ 117     $ 183     $ 260     $ 335     $ 380     $ 411     $ 426     $ 439     $ 452     $ 466  

JTCR016 (WT-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 27     $ 81     $ 245     $ 426     $ 702     $ 993     $ 1,179     $ 1,308     $ 1,369     $ 1,416     $ 1,467     $ 1,519  

LeY

  $ —       $ —       $ —       $ —       $ —       $ —       $ 15     $ 46     $ 111     $ 175     $ 294     $ 426     $ 515     $ 577     $ 606     $ 628     $ 650     $ 674  

JTCR018 (HPV)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 4     $ 11     $ 36     $ 65     $ 125     $ 192     $ 236     $ 266     $ 277     $ 284     $ 292     $ 300  

January 2018 Projections

In January 2018, Juno’s management updated certain assumptions underlying the November 2017 Projections relating to the potential impact of recent changes in the U.S. tax laws, feedback from various regulators around clinical trial design, competitor clinical data, and early understandings of competitor launch experiences. The Risk-Adjusted Projections contained in the January 2018 Projections were adopted by the Juno Board and were relied upon by Morgan Stanley as the basis for the rendering of its fairness opinion described in “—Opinion of Juno’s Financial Advisor” (and were the only financial projections with respect to Juno used by Morgan Stanley in rendering such opinion). Certain of the base case and upside case Non-Risk Adjusted Projections included in the January 2018 Projections were provided by Juno management to Celgene. In the case of the “JCAR017 Ex-US Royalty” line item, Juno provided Celgene the expected gross revenue number for such line item, as Juno is entitled to a net 10% royalty from Celgene on products in all territories other than the U.S. and China following Celgene’s exercise of its option in 2016 to develop and commercialize the Juno CD19 program outside North America and China. Except as otherwise described herein, each case (base, upside and downside) in the January 2018 Projections was based on the same assumptions as those used to produce the November 2017 Projections. Morgan Stanley used the Risk-Adjusted Projections contained in the January 2018 Projections to calculate unlevered free cash flow, tax shield from segments with negative earnings before taxes and tax savings from net operating losses with respect to the Risk-Adjusted Projections contained in the January 2018 Projections. Morgan Stanley did not calculate any financial metrics with respect to any Non-Risk-Adjusted Projections.

Risk-Adjusted Projections—Base Case—January 2018 Projections

(Amounts in Millions)

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

Total Net Sales

  $ 12     $ 162     $ 732     $ 1,675     $ 2,373     $ 2,919     $ 3,454     $ 3,948     $ 4,487     $ 4,979     $ 5,498     $ 5,990     $ 6,365     $ 6,703     $ 7,021     $ 7,341     $ 7,678     $ 8,033  

Cost of Goods Sold

  $ —       $ (42   $ (179   $ (383   $ (530   $ (639   $ (747   $ (711   $ (792   $ (862   $ (937   $ (1,004   $ (1,056   $ (1,103   $ (1,141   $ (1,178   $ (1,217   $ (1,258

Total Gross Profit

  $ 12     $ 120     $ 553     $ 1,292     $ 1,844     $ 2,280     $ 2,707     $ 3,237     $ 3,695     $ 4,117     $ 4,561     $ 4,986     $ 5,309     $ 5,600     $ 5,880     $ 6,163     $ 6,461     $ 6,774  

EBIT

  $ (347   $ (390   $ (15   $ 653     $ 1,135     $ 1,520     $ 2,104     $ 2,538     $ 3,016     $ 3,415     $ 3,895     $ 4,295     $ 4,592     $ 4,857     $ 5,108     $ 5,361     $ 5,628     $ 5,910  

Net Income Incl.
NOL Adj. (1)

  $ (425   $ (432   $ (119   $ 517     $ 921     $ 1,136     $ 1,404     $ 1,767     $ 1,933     $ 2,424     $ 2,977     $ 3,469     $ 3,881     $ 4,268     $ 4,646     $ 5,024     $ 5,414     $ 5,814  

Portfolio Unlevered
Free Cash Flows(2)

  $ (401   $ (452   $ (148   $ 334     $ 701     $ 992     $ 1,462     $ 1,729     $ 2,081     $ 2,430     $ 2,784     $ 3,105     $ 3,371     $ 3,592     $ 3,802     $ 3,996     $ 4,195     $ 4,405  

Platform Unlevered
Free Cash Flows(3)

  $ (78   $ (42   $ (104   $ (112   $ (169   $ (98   $ (281   $ (244   $ (506   $ (268   $ (29   $ 161     $ 345     $ 529     $ 713     $ 896     $ 1,080     $ 1,264  

Tax Shield from EBT Negative Segments (4)

  $ 3     $ 7     $ 66     $ 85     $ 131     $ 128     $ 128     $ 129     $ 179     $ 127     $ 75     $ 72     $ 76     $ 79     $ 83     $ 88     $ 92     $ 97  

Tax Savings from NOLs (5)

  $ —       $ —       $ —       $ 100     $ 178     $ 41     $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —    

 

(1) Net income including NOL adjustment includes tax-effected annual platform R&D expense and tax-effected platform R&D return, with such return based on the market data inputs and related weighted average cost of capital assumptions assumed in the January 21, 2018 Juno Board materials. Includes impact of TaxAttributes. Figures shown reflect January 21, 2018 Juno Board materials.
(2) Portfolio unlevered free cash flow calculated as earnings before interest and taxes from named drugs and royalty streams, less taxes at the effective tax rate, less capital expenditures, plus depreciation and amortization and less changes in net working capital. Unlevered free cash flow does not include cash flowassociated with Tax Attributes. Figures shown reflect January 21, 2018 Juno Board materials.
(3) Platform unlevered free cash flow calculated as return on platform investment net of platform R&D expenses less taxes at the effective tax rate, Platform unlevered free cash flow does not include cash flow associated with Tax Attributes. Figures shown reflect January 21, 2018 Juno Board materials.
(4) Tax shield from EBT negative segments represents the tax savings resulting from loss bearing product lines; calculated as the difference between tax liability on a product line basis relative to tax liability on a consolidated basis. Figures shown reflect January 21, 2018 Juno Board materials.
(5) Tax savings from NOLs represents the cash flows associated with utilization of net operating losses. Figures shown reflect January 21, 2018 Juno Board materials.

 

44


In addition, as part of such base case Risk-Adjusted Projections, Juno prepared the risk-adjusted product level revenue projections as set forth below.

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

JCAR017 US Revenue

  $ —       $ 133     $ 654     $ 1,388     $ 1,816     $ 2,045     $ 2,206     $ 2,466     $ 2,732     $ 2,897     $ 3,053     $ 3,217     $ 3,390     $ 3,573     $ 3,766     $ 3,969     $ 4,183     $ 4,408  

JCAR017 Ex-US Royalty

  $ —       $ —       $ 6     $ 49     $ 120     $ 159     $ 171     $ 176     $ 190     $ 204     $ 207     $ 208     $ 210     $ 211     $ 212     $ 214     $ 215     $ 217  

JCARH125 Net Revenue

  $ —       $ —       $ 8     $ 131     $ 325     $ 604     $ 929     $ 1,094     $ 1,206     $ 1,368     $ 1,489     $ 1,557     $ 1,619     $ 1,683     $ 1,751     $ 1,823     $ 1,898     $ 1,977  

Other Royalty Revenue

  $ 12     $ 29     $ 65     $ 107     $ 112     $ 112     $ 121     $ 133     $ 143     $ 150     $ 157     $ 164     $ 141     $ 118     $ 123     $ 128     $ 133     $ 138  

JCAR024 (ROR-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 5     $ 14     $ 38     $ 63     $ 110     $ 162     $ 197     $ 221     $ 232     $ 240     $ 248     $ 257  

JCAR020 (MUC-16)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 6     $ 17     $ 41     $ 64     $ 91     $ 117     $ 133     $ 144     $ 149     $ 154     $ 158     $ 163  

JTCR016 (WT-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 9     $ 28     $ 86     $ 149     $ 246     $ 348     $ 413     $ 458     $ 479     $ 496     $ 513     $ 532  

LeY

  $ —       $ —       $ —       $ —       $ —       $ —       $ 5     $ 16     $ 39     $ 61     $ 103     $ 149     $ 180     $ 202     $ 212     $ 220     $ 228     $ 236  

JTCR018 (HPV)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 1     $ 4     $ 13     $ 23     $ 44     $ 67     $ 83     $ 93     $ 97     $ 99     $ 102     $ 105  

Risk-Adjusted Projections—Upside Case—January 2018 Projections

(Amounts in Millions)

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

Total Net Sales

  $ 16     $ 293     $ 1,314     $ 2,598     $ 3,603     $ 4,680     $ 6,003     $ 7,519     $ 9,024     $ 10,004     $ 10,520     $ 10,971     $ 11,426     $ 11,904     $ 12,427     $ 12,978     $ 13,557     $ 14,165  

Cost of Goods Sold

  $ —       $ (82   $ (331   $ (602   $ (824   $ (1,054   $ (1,313   $ (1,352   $ (1,582   $ (1,732   $ (1,802   $ (1,859   $ (1,917   $ (1,978   $ (2,041   $ (2,107   $ (2,176   $ (2,248

Total Gross Profit

  $ 16     $ 212     $ 984     $ 1,996     $ 2,778     $ 3,626     $ 4,690     $ 6,167     $ 7,441     $ 8,272     $ 8,717     $ 9,112     $ 9,509     $ 9,926     $ 10,386     $ 10,870     $ 11,380     $ 11,917  

EBIT

  $ (343   $ (298   $ 415     $ 1,232     $ 1,958     $ 2,795     $ 4,129     $ 5,581     $ 6,833     $ 7,640     $ 8,052     $ 8,422     $ 8,792     $ 9,182     $ 9,614     $ 10,068     $ 10,548     $ 11,053  

Net Income Incl.
NOL Adj. (1)

  $ (421   $ (340   $ 312     $ 1,060     $ 1,377     $ 2,077     $ 2,963     $ 4,109     $ 4,871     $ 5,677     $ 6,178     $ 6,646     $ 7,115     $ 7,599     $ 8,115     $ 8,649     $ 9,202     $ 9,774  

Portfolio Unlevered Free Cash Flows (2)

  $ (399   $ (375   $ 139     $ 724     $ 1,270     $ 1,887     $ 2,765     $ 3,673     $ 4,689     $ 5,536     $ 6,025     $ 6,344     $ 6,624     $ 6,918     $ 7,240     $ 7,582     $ 7,942     $ 8,322  

Platform Unlevered Free Cash Flows (3)

  $ (78   $ (42   $ (104   $ (112   $ (169   $ (98   $ (281   $ (244   $ (506   $ (268   $ (29   $ 161     $ 345     $ 529     $ 713     $ 896     $ 1,080     $ 1,264  

Tax Shield from EBT Negative Segments (4)

  $ 4     $ 8     $ 91     $ 100     $ 157     $ 144     $ 121     $ 115     $ 179     $ 127     $ 75     $ 72     $ 76     $ 79     $ 83     $ 88     $ 92     $ 97  

Tax Savings from NOLs (5)

  $ —       $ —       $ 72     $ 197     $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —    

 

(1)  Net income including NOL adjustment includes tax-effected annual platform R&D expense and tax-effected platform R&D return, with such return based on the market data inputs and related weighted average cost of capital assumptions assumed in the January 21, 2018 Juno Board materials. Includes impact of Tax Attributes. Figures shown reflect January 21, 2018 Juno Board materials.
(2)  Portfolio unlevered free cash flow calculated as earnings before interest and taxes from named drugs and royalty streams, less taxes at the effective tax rate, less capital expenditures, plus depreciation and amortization and less changes in net working capital. Unlevered free cash flow does not include cash flow associated with Tax Attributes. Figures shown reflect January 21, 2018 Juno Board materials.
(3)  Platform unlevered free cash flow calculated as return on platform investment net of platform R&D expenses less taxes at the effective tax rate, Platform unlevered free cash flow does not include cash flow associated with Tax Attributes. Figures shown reflect January 21, 2018 Juno Board materials.
(4)  Tax shield from EBT negative segments represents the tax savings resulting from loss bearing product lines; calculated as the difference between tax liability on a product line basis relative to tax liability on a consolidated basis. Figures shown reflect January 21, 2018 Juno Board materials.
(5)  Tax savings from NOLs represents the cash flows associated with utilization of net operating losses. Figures shown reflect January 21, 2018 Juno Board materials.

In addition, as part of such upside case Risk-Adjusted Projections, Juno prepared the risk-adjusted product level revenue projections as set forth below.

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

JCAR017 US Revenue

  $ —       $ 257     $ 1,206     $ 2,142     $ 2,727     $ 3,250     $ 3,629     $ 4,046     $ 4,434     $ 4,680     $ 4,933     $ 5,199     $ 5,480     $ 5,776     $ 6,088     $ 6,416     $ 6,763     $ 7,129  

JCAR017 Ex-US Royalty

  $ —       $ —       $ 15     $ 105     $ 189     $ 241     $ 274     $ 287     $ 303     $ 315     $ 318     $ 320     $ 322     $ 324     $ 326     $ 328     $ 330     $ 333  

JCARH125 Net Revenue

  $ —       $ —       $ 17     $ 247     $ 597     $ 1,108     $ 1,669     $ 2,023     $ 2,375     $ 2,666     $ 2,802     $ 2,904     $ 3,012     $ 3,125     $ 3,244     $ 3,369     $ 3,500     $ 3,638  

Other Royalty Revenue

  $ 16     $ 37     $ 77     $ 105     $ 88     $ 81     $ 90     $ 103     $ 108     $ 112     $ 117     $ 122     $ 109     $ 94     $ 98     $ 103     $ 107     $ 112  

JCAR024 (ROR-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 67     $ 209     $ 356     $ 441     $ 465     $ 480     $ 496     $ 512     $ 530     $ 548     $ 567     $ 587  

JCAR020 (MUC-16)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 46     $ 142     $ 238     $ 291     $ 304     $ 313     $ 322     $ 331     $ 341     $ 351     $ 362     $ 373  

JTCR016 (WT-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 137     $ 430     $ 732     $ 908     $ 959     $ 990     $ 1,024     $ 1,058     $ 1,095     $ 1,133     $ 1,173     $ 1,215  

LeY

  $ —       $ —       $ —       $ —       $ —       $ —       $ 61     $ 191     $ 324     $ 401     $ 423     $ 437     $ 452     $ 468     $ 485     $ 502     $ 520     $ 539  

JTCR018 (HPV)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 29     $ 89     $ 153     $ 191     $ 200     $ 205     $ 210     $ 216     $ 221     $ 227     $ 234     $ 240  

 

45


Risk-Adjusted Projections—Downside Case—January 2018 Projections

(Amounts in Millions)

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

Total Net Sales

  $ 10     $ 67     $ 332     $ 848     $ 1,249     $ 1,549     $ 1,804     $ 2,012     $ 2,200     $ 2,367     $ 2,549     $ 2,735     $ 2,866     $ 3,009     $ 3,153     $ 3,301     $ 3,456     $ 3,619  

Cost of Goods Sold

  $ —       $ (13   $ (73   $ (182   $ (265   $ (325   $ (376   $ (349   $ (377   $ (400   $ (423   $ (447   $ (467   $ (486   $ (503   $ (520   $ (537   $ (556

Total Gross Profit

  $ 10     $ 54     $ 259     $ 667     $ 984     $ 1,223     $ 1,428     $ 1,663     $ 1,823     $ 1,968     $ 2,126     $ 2,288     $ 2,399     $ 2,523     $ 2,650     $ 2,781     $ 2,919     $ 3,063  

EBIT

  $ (349   $ (456   $ (309   $ 15     $ 275     $ 463     $ 826     $ 964     $ 1,144     $ 1,266     $ 1,470     $ 1,607     $ 1,692     $ 1,789     $ 1,888     $ 1,989     $ 2,096     $ 2,208  

Net Income Incl. NOL Adj. (1)

  $ (427   $ (498   $ (413   $ (97   $ 106     $ 351     $ 519     $ 687     $ 589     $ 769     $ 1,110     $ 1,399     $ 1,648     $ 1,906     $ 2,166     $ 2,428     $ 2,694     $ 2,964  

Portfolio Unlevered Free Cash Flows (2)

  $ (402   $ (508   $ (360   $ (128   $ 71     $ 213     $ 529     $ 595     $ 738     $ 853     $ 1,001     $ 1,114     $ 1,193     $ 1,269     $ 1,349     $ 1,424     $ 1,501     $ 1,582  

Platform Unlevered Free Cash Flows (3)

  $ (78   $ (42   $ (104   $ (112   $ (169   $ (98   $ (281   $ (244   $ (506   $ (268   $ (29   $ 161     $ 345     $ 529     $ 713     $ 896     $ 1,080     $ 1,264  

Tax Shield from EBT
Negative Segments (4)

  $ 2     $ 6     $ 14     $ 79     $ 136     $ 128     $ 132     $ 140     $ 186     $ 127     $ 75     $ 72     $ 76     $ 79     $ 83     $ 88     $ 92     $ 97  

Tax Savings from NOLs (5)

  $ —       $ —       $ —       $ —       $ 24     $ 70     $ 100     $ 133     $ 97     $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  Net income including NOL adjustment includes tax-effected annual platform R&D expense and tax-effected platform R&D return, with such return based on the market data inputs and related weighted average cost of capital assumptions assumed in the January 21, 2018 Juno Board materials. Includes impact of Tax Attributes. Figures shown reflect January 21, 2018 Juno Board materials.
(2)  Portfolio unlevered free cash flow calculated as earnings before interest and taxes from named drugs and royalty streams, less taxes at the effective tax rate, less capital expenditures, plus depreciation and amortization and less changes in net working capital. Unlevered free cash flow does not include cash flow associated with Tax Attributes. Figures shown reflect January 21, 2018 Juno Board materials.
(3)  Platform unlevered free cash flow calculated as return on platform investment net of platform R&D expenses less taxes at the effective tax rate, Platform unlevered free cash flow does not include cash flow associated with Tax Attributes. Figures shown reflect January 21, 2018 Juno Board materials.
(4)  Tax shield from EBT negative segments represents the tax savings resulting from loss bearing product lines; calculated as the difference between tax liability on a product line basis relative to tax liability on a consolidated basis. Figures shown reflect January 21, 2018 Juno Board materials.
(5)  Tax savings from NOLs represents the cash flows associated with utilization of net operating losses. Figures shown reflect January 21, 2018 Juno Board materials.

In addition, as part of such downside case Risk-Adjusted Projections, Juno prepared the risk-adjusted product level revenue projections as set forth below.

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

JCAR017 US Revenue

  $ —       $ 42     $ 266     $ 666     $ 929     $ 1,074     $ 1,172     $ 1,263     $ 1,359     $ 1,452     $ 1,538     $ 1,621     $ 1,709     $ 1,801     $ 1,899     $ 2,002     $ 2,110     $ 2,225  

JCAR017 Ex-US Royalty

  $ —       $ —       $ 2     $ 22     $ 57     $ 79     $ 89     $ 92     $ 95     $ 98     $ 101     $ 102     $ 103     $ 103     $ 104     $ 105     $ 105     $ 106  

JCARH125 Net Revenue

  $ —       $ —       $ 4     $ 56     $ 144     $ 273     $ 406     $ 494     $ 537     $ 559     $ 580     $ 602     $ 625     $ 650     $ 676     $ 703     $ 731     $ 761  

Other Royalty Revenue

  $ 9     $ 25     $ 60     $ 103     $ 118     $ 124     $ 131     $ 140     $ 148     $ 156     $ 162     $ 169     $ 142     $ 135     $ 140     $ 146     $ 152     $ 157  

JCAR024 (ROR-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 1     $ 4     $ 11     $ 18     $ 31     $ 46     $ 56     $ 63     $ 66     $ 68     $ 71     $ 73  

JCAR020 (MUC-16)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 2     $ 5     $ 12     $ 18     $ 26     $ 34     $ 38     $ 41     $ 43     $ 44     $ 45     $ 47  

JTCR016 (WT-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 3     $ 8     $ 25     $ 43     $ 70     $ 99     $ 118     $ 131     $ 137     $ 142     $ 147     $ 152  

LeY

  $ —       $ —       $ —       $ —       $ —       $ —       $ 2     $ 5     $ 11     $ 17     $ 29     $ 43     $ 52     $ 58     $ 61     $ 63     $ 65     $ 67  

JTCR018 (HPV)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 0     $ 1     $ 4     $ 7     $ 12     $ 19     $ 24     $ 27     $ 28     $ 28     $ 29     $ 30  

Non-Risk-Adjusted Projections—Base Case—January 2018 Projections

(Amounts in Millions)

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

Total Net Sales

  $ 13     $ 182     $ 837     $ 2,086     $ 3,163     $ 4,208     $ 5,665     $ 8,181     $ 11,815     $ 14,785     $ 18,097     $ 21,232     $ 23,394     $ 25,046     $ 26,205     $ 27,279     $ 28,406     $ 29,591  

Cost of Goods Sold

  $ —       $ (47   $ (203   $ (475   $ (708   $ (920   $ (1,212   $ (1,465   $ (2,044   $ (2,486   $ (2,993   $ (3,451   $ (3,763   $ (4,002   $ (4,152   $ (4,288   $ (4,430   $ (4,577

Total Gross Profit

  $ 13     $ 135     $ 635     $ 1,610     $ 2,455     $ 3,288     $ 4,453     $ 6,716     $ 9,770     $ 12,299     $ 15,104     $ 17,780     $ 19,631     $ 21,044     $ 22,053     $ 22,990     $ 23,977     $ 25,014  

EBIT

  $ (359   $ (435   $ (88   $ 663     $ 1,299     $ 1,770     $ 3,243     $ 4,731     $ 8,176     $ 10,674     $ 14,108     $ 16,750     $ 18,566     $ 19,943     $ 20,914     $ 21,813     $ 22,758     $ 23,753  

Net Income Incl. NOL Adj. (1)

  $ (436   $ (477   $ (192   $ 526     $ 1,078     $ 1,326     $ 2,280     $ 3,455     $ 5,905     $ 8,013     $ 10,841     $ 13,059     $ 14,641     $ 15,885     $ 16,817     $ 17,692     $ 18,604     $ 19,554  

 

(1) Net income including NOL adjustment includes tax-effected annual platform R&D expense and tax-effected platform R&D return, with such return based on the market data inputs and resulting weighted average cost of capital assumptions assumed in the January 21, 2018 Juno Board materials. Includes impact of Tax Attributes.

 

46


In addition, as part of such base case Non-Risk-Adjusted Projections, Juno prepared the non-risk-adjusted product level revenue projections as set forth below.

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

JCAR017 US Revenue

  $ —       $ 148     $ 739     $ 1,658     $ 2,275     $ 2,619     $ 2,957     $ 4,441     $ 6,009     $ 6,511     $ 6,862     $ 7,232     $ 7,622     $ 8,033     $ 8,467     $ 8,924     $ 9,405     $ 9,913  

JCAR017 Ex-US Royalty

  $ —       $ —       $ 6     $ 56     $ 143     $ 200     $ 221     $ 239     $ 367     $ 493     $ 512     $ 515     $ 519     $ 522     $ 526     $ 530     $ 533     $ 537  

JCARH125 Net Revenue

  $ —       $ —       $ 14     $ 237     $ 601     $ 1,241     $ 2,038     $ 2,456     $ 2,977     $ 3,861     $ 4,459     $ 4,700     $ 4,880     $ 5,070     $ 5,269     $ 5,479     $ 5,699     $ 5,931  

Other Royalty Revenue

  $ 14     $ 34     $ 79     $ 135     $ 143     $ 149     $ 186     $ 258     $ 302     $ 321     $ 338     $ 352     $ 318     $ 246     $ 256     $ 266     $ 277     $ 287  

JCAR024 (ROR-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 46     $ 139     $ 377     $ 627     $ 1,096     $ 1,620     $ 1,969     $ 2,211     $ 2,317     $ 2,396     $ 2,479     $ 2,566  

JCAR020 (MUC-16)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 56     $ 167     $ 408     $ 641     $ 911     $ 1,174     $ 1,331     $ 1,437     $ 1,491     $ 1,536     $ 1,582     $ 1,631  

JTCR016 (WT-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 95     $ 285     $ 859     $ 1,493     $ 2,457     $ 3,476     $ 4,127     $ 4,577     $ 4,790     $ 4,957     $ 5,133     $ 5,317  

LeY

  $ —       $ —       $ —       $ —       $ —       $ —       $ 53     $ 159     $ 388     $ 612     $ 1,027     $ 1,491     $ 1,803     $ 2,021     $ 2,121     $ 2,197     $ 2,276     $ 2,360  

JTCR018 (HPV)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 13     $ 38     $ 127     $ 228     $ 436     $ 671     $ 826     $ 930     $ 969     $ 995     $ 1,022     $ 1,050  

Non-Risk-Adjusted Projections—Upside Case—January 2018 Projections

(Amounts in Millions)

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

Total Net Sales

  $ 19     $ 331     $ 1,504     $ 3,261     $ 4,862     $ 6,990     $ 12,680     $ 23,576     $ 35,229     $ 41,803     $ 44,131     $ 45,793     $ 47,498     $ 49,266     $ 51,186     $ 53,203     $ 55,322     $ 57,547  

Cost of Goods Sold

  $ —       $ (91   $ (375   $ (753   $ (1,115   $ (1,573   $ (2,580   $ (3,982   $ (5,814   $ (6,853   $ (7,199   $ (7,420   $ (7,650   $ (7,890   $ (8,141   $ (8,402   $ (8,675   $ (8,960

Total Gross Profit

  $ 19     $ 240     $ 1,128     $ 2,508     $ 3,747     $ 5,417     $ 10,100     $ 19,594     $ 29,415     $ 34,950     $ 36,932     $ 38,373     $ 39,848     $ 41,376     $ 43,045     $ 44,801     $ 46,646     $ 48,587  

EBIT

  $ (353   $ (330   $ 406     $ 353     $ 1,470     $ 3,199     $ 9,310     $ 18,729     $ 28,521     $ 34,024     $ 35,935     $ 37,343     $ 38,783     $ 40,275     $ 41,907     $ 43,623     $ 45,428     $ 47,326  

Net Income Incl.
NOL Adj. (1)

  $ (431   $ (372   $ 302     $ 230     $ 1,166     $ 2,388     $ 6,952     $ 14,234     $ 21,571     $ 25,992     $ 27,648     $ 28,916     $ 30,208     $ 31,540     $ 32,981     $ 34,486     $ 36,060     $ 37,705  

 

(1) Net income including NOL adjustment includes tax-effected annual platform R&D expense and tax-effected platform R&D return, with such return based on the market data inputs and resulting weighted average cost of capital assumptions assumed in the January 21, 2018 Juno Board materials. Includes impact of Tax Attributes.

In addition, as part of such upside case Non-Risk-Adjusted Projections, Juno prepared the non-risk-adjusted product level revenue projections as set forth below.

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

JCAR017 US Revenue

  $ —       $ 285     $ 1,359     $ 2,556     $ 3,414     $ 4,297     $ 5,090     $ 7,429     $ 9,537     $ 10,116     $ 10,664     $ 11,240     $ 11,848     $ 12,489     $ 13,165     $ 13,878     $ 14,629     $ 15,421  

JCAR017 Ex-US Royalty

  $ —       $ —       $ 17     $ 118     $ 226     $ 307     $ 366     $ 400     $ 534     $ 643     $ 651     $ 656     $ 660     $ 665     $ 669     $ 674     $ 678     $ 683  

JCARH125 Net Revenue

  $ —       $ —       $ 30     $ 449     $ 1,103     $ 2,273     $ 3,667     $ 4,907     $ 6,879     $ 8,492     $ 9,053     $ 9,376     $ 9,716     $ 10,072     $ 10,447     $ 10,840     $ 11,253     $ 11,688  

Other Royalty Revenue

  $ 18     $ 46     $ 98     $ 138     $ 119     $ 114     $ 159     $ 233     $ 245     $ 241     $ 250     $ 262     $ 234     $ 181     $ 189     $ 198     $ 207     $ 215  

JCAR024 (ROR-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 667     $ 2,085     $ 3,555     $ 4,410     $ 4,652     $ 4,802     $ 4,959     $ 5,124     $ 5,296     $ 5,477     $ 5,666     $ 5,865  

JCAR020 (MUC-16)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 458     $ 1,417     $ 2,385     $ 2,906     $ 3,045     $ 3,130     $ 3,219     $ 3,312     $ 3,409     $ 3,511     $ 3,617     $ 3,728  

JTCR016 (WT-1)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 1,374     $ 4,299     $ 7,320     $ 9,081     $ 9,586     $ 9,904     $ 10,236     $ 10,584     $ 10,949     $ 11,331     $ 11,732     $ 12,152  

LeY

  $ —       $ —       $ —       $ —       $ —       $ —       $ 611     $ 1,910     $ 3,241     $ 4,006     $ 4,229     $ 4,372     $ 4,523     $ 4,681     $ 4,847     $ 5,021     $ 5,203     $ 5,394  

JTCR018 (HPV)

  $ —       $ —       $ —       $ —       $ —       $ —       $ 287     $ 894     $ 1,533     $ 1,908     $ 2,001     $ 2,051     $ 2,103     $ 2,158     $ 2,215     $ 2,274     $ 2,336     $ 2,400  

Non-Risk-Adjusted Projections—Downside Case—January 2018 Projections

(Amounts in Millions)

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

Total Net Sales

  $ 10     $ 75     $ 381     $ 1,040     $ 1,605     $ 2,137     $ 2,716     $ 3,384     $ 4,280     $ 5,102     $ 6,044     $ 6,973     $ 7,595     $ 8,110     $ 8,490     $ 8,848     $ 9,224     $ 9,619  

Cost of Goods Sold

  $ —       $ (15   $ (83   $ (223   $ (343   $ (452   $ (567   $ (584   $ (726   $ (849   $ (983   $ (1,114   $ (1,208   $ (1,281   $ (1,329   $ (1,373   $ (1,419   $ (1,467

Total Gross Profit

  $ 10     $ 60     $ 298     $ 817     $ 1,262     $ 1,685     $ 2,149     $ 2,800     $ 3,555     $ 4,253     $ 5,061     $ 5,859     $ 6,388     $ 6,829     $ 7,161     $ 7,475     $ 7,805     $ 8,152  

EBIT

  $ (362   $ (511   $ (425   $ (218   $ 105     $ 166     $ 938     $ 815     $ 1,960     $ 2,628     $ 4,103     $ 4,867     $ 5,361     $ 5,766     $ 6,061     $ 6,335     $ 6,625     $ 6,929  

Net Income Incl. NOL Adj. (1)

  $ (439   $ (553   $ (529   $ (330   $ (64   $ 68     $ 627     $ 545     $ 1,387     $ 1,842     $ 3,137     $ 3,909     $ 4,473     $ 4,969     $ 5,379     $ 5,774     $ 6,181     $ 6,599  

 

(1) Net income including NOL adjustment includes tax-effected annual platform R&D expense and tax-effected platform R&D return, with such return based on the market data inputs and resulting weighted average cost of capital assumptions assumed in the January 21, 2018 Juno Board materials. Includes impact of Tax Attributes.

 

47


In addition, as part of such downside case Non-Risk-Adjusted Projections, Juno prepared the non-risk-adjusted product level revenue projections as set forth below.

 

    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035  

JCAR017 US Revenue

  $ —       $ 47     $ 303     $ 790     $ 1,129     $ 1,344     $ 1,501     $ 1,763     $ 2,119     $ 2,436     $ 2,632     $ 2,777     $ 2,927     $ 3,086     $ 3,253     $ 3,429     $ 3,615     $ 3,811  

JCAR017 Ex-US Royalty

  $ —       $ —       $ 3     $ 26     $ 67     $ 96     $ 111     $ 119     $ 136     $ 160     $ 179     $ 186     $ 188     $ 189     $ 190     $ 191     $ 193     $ 194  

JCARH125 Net Revenue

  $ —       $ —       $ 6     $ 102     $ 266     $ 543     $ 858     $ 1,071     $ 1,171     $ 1,220     $ 1,266     $ 1,314     $ 1,364     $ 1,418     $ 1,474     $ 1,532     $ 1,594     $ 1,659  

Other Royalty Revenue

  $ 10     $ 28     $ 69     $ 122     $ 143     $ 153     $ 171     $ 206     $ 238     $ 257     $ 273     $ 286     $